Network theme won't pull thumbnail image from blog

In "Advanced Options" I have "Show Thumbnails In Blog Posts?" set to yes. The front page only shows the Default Thumbnail Image. I have images in some of the test blog posts, but it doesn't pull those images through, just the default image. How can I get it to display the image in the blog post as the thumbnail on the front page?

the site is The image that you see on the posts on the front page is the one I have set in "Default Thumbnail Image URL", but if you click on the first post, "test blog post", you'll see there is a different logo image in the post. I want that image to show on the front page (so as that each blog in the network will show its individual logo for the thumbnail on it's posts on the network front page).