Yeah for some reason the action does not support variables in edit view.
What I found to work was to copy the action on your clipboard and pasting it into a code editor like Visual Studio Code.
Copy:

Paste:

Then find the "Occurence" in it (its in first row where there are other settings for the action):

Change the 1 to the text of your variable so in your case LoopIndex (without the percent signs around it)

Then Copy all of the code again from the code editor and paste it into your PAD flow. Then a new Move mouse to image -action should appear (unless you edited something wrong in the actions code).

Downside to this is that you cant see the variable in the Occurrence field in Edit

And so if you want to change to a different variable you need to do it in code editor again.
You can also just try copying this action and pasting it in to your flow. Its set to have Occurrence variable be %LoopIndex% like you mentioned. It will give error since there is no image selected so just pick your image and it should work.
MouseAndKeyboard.MoveMouseToImage.MoveMouseToImage Images: `` SearchForImageOn: MouseAndKeyboard.SearchTarget.EntireScreen MousePositionOnImage: MouseAndKeyboard.PositionOnImage.MiddleCenter OffsetX: 0 OffsetY: 0 Tolerance: 10 MovementStyle: MouseAndKeyboard.MovementStyle.Instant Occurence: LoopIndex Timeout: 5 SearchAlgorithm: MouseAndKeyboard.ImageFinderAlgorithm.Legacy X=> X Y=> Y