I'm trying to get into making a map, but my prefabs folder is empty. (As I believe that's where the prefabs and other models are kept?) So my new object window has no objects to select. How can I get them back?

Peerage are created by the user. I believe what you're looking for might be the SDK_content/maps/instances folder (might be SDK_resources, can't remember).

Can someone go into their hammer options and tell me what the "Prefab Directory" value is set to? Rubrics's suggestion didn't help.

Um, no, I don't think you're getting me. What are you trying to do? If you're trying to use prefabs, you have to create them yourself or download them from here. If, on the other hand, you're trying to use the instances that are included with the SDK by default, which are like prefabs but easier to use (it sounds like this is what you want) then create a func_instance, and set it to the filename you want, found in the instances folder. For more info, view msleeper's brilliant tutorial here.

http://i56.tinypic.com/95wmkk.png
There's a image of my issue, I can't insert stuff like buttons, cubes, etc

Click the entity button on the left. Change the entity to a "func_instance". Under "VMF filename" browse and find the instance that you need. It's actually a lot better than prefabs.

Here's a fairly good video tutorial. It's long, but covers just about every one.

http://www.youtube.com/watch?v=38e6Xtx07dQ

Aaaaaaah, heh. Your problem is completely different than what I thought it was. Sorry! To make things like buttons, use the entity tool (it's the button on the left that looks like a white 'i'). A push button is prop_button, a floor button is prop_floor_button, and so on. For more of the entities available in Portal 2m see here. I'd also recommend clicking the oink to the mapping wiki at the top of this page.

Right, I forgot.