Fun Theme Thumbnails on home page

Hi, I just have a quick question about the thumbnails on the fun theme in the articles block, how do you get them to display correctly? I put an image in the post, but on the home page it is just showing a small part of the picture rather than the thumbnail.

I had a problem adding the image, as when I went to add the image on the new post it brought me to a blank page once I chose insert image, so I inserted it using the URL, would this be the problem?

While I am here, I also have another question, I am getting a broken link when I create a new group after adding the name. How would I solve this?

Thanks.