You could just use the "CB Gallery - Comment Notification" system action, which will send notifications to the owner of the media when someone comments on it. If you want to send an email instead suggest just saving a copy of that system action then changing the Type to Email. The user id of the user making the comment would be [var3_user_id] and the media owner user id would be [var2_user_id].

Am I able to create a new Auto Action - Private Message to do this?

Yes, change the Type to Private Message.

If so, What do I put in the Private Message To and from as [var3_user_id] and [var2_user_id] do not seem to be being substituted if I use them.

Then I'm guessing you're using the wrong trigger and didn't make a copy of existing working notification system action then simply changed its type.

I cannot find the System Auto Action you describe of "CB Gallery - Comment Notification" , possible because I am using Auto Actions 7.0.0 as if I upgrade then some of my own auto actions do not seem to work.

Please be sure everything is up to date. You will of course not have latest system actions if out of date. Regarding some of your own actions no longer working you need to review them carefully as some behaviors have changed. We can help you understand why they're not working if you can provide what about them is not working. You can also debug auto actions individually by enabling debug mode and maximum error reporting in Joomla global configuration then within your auto action under parameters enable debug.

Can I use substitutions in the body of the PM such as the username of the commenter and perhaps a link to the gallery entry?

Yes, but as far as linking to a single media entry you can only do so by directly linking to the media it self using the below.

Fullsize:
index.php?option=com_comprofiler&view=pluginclass&plugin=cbgallery&action=item&id=MEDIA_ID_HERE

Thumbnail:
index.php?option=com_comprofiler&view=pluginclass&plugin=cbgallery&action=item&func=preview&id=MEDIA_ID_HERE