Launch Images in iOS 7 with Xcode 5
Anden, I ran into the same problem today while adding a new target to the half dozen I already had that were set up in the same way that you set up yours.
I decided to use that "Use Asset Catalog" button, which took some work to set up, but has simplified things greatly in the end:
1- (optional) Delete (remove references only) the icon and launch image files from your project. I don't think you need the files to be in the project navigator anymore.
2- Choose your primary target, go to "General" and "App Icons" (as you showed above).
3- Press the "Use Asset Catalog" button, with the "Migrate Launch Images" checked as well.
4- This creates a file called "Images.xcassets" in your project navigator. Go there, and find the App Icon and Launch Image catalogs corresponding with the particular target. You can drag and drop image files from the finder into the slots in the catalog, and rename the icon/default groups from the list on the left.
5- Once you've got the image slots filled up, go back to the "General" for each target, and press the "Use Asset Catalog" button again for each target. Instead of creating a new xcassets file for each, you can store all the launch images and icon files in the same xcassets file.