Preferrences -> Miscellaneous -> Advanced -> max_thumbnail_size. I believe default is 256. I have mine set to 512 so all the code listed below is set accordingly. Adjust those numbers for the max_thumbnail_size setting you use.
Create a folder.jpg and place it inside that folder to represent that folders thumbnail.
You can either use this button on a selected image to make the folder.jpg (creates a new image from the selected image as .jpg, resizes it to 512x512 and hides it)
Image CONVERT=jpg HERE AS=folder.jpg HEIGHT=512 WIDTH=512 PRESERVEASPECTRATIO REPLACE=always
SetAttr ATTR=hs FILE=folder.jpg
Or, if you would rather have a randomly picked image, use wowbagger's or tbone's scripts (read to the end of the thread). Just highlight all the folders you want to have a folder.jpg created for, and hit the button. It will go into each selected folder and randomly pick a file for it's thumbnail and hide it. You will need tbone's SelectEX script installed if you pick to use tbone's script.
Hope this helps.