This plugin lets provides a much better recent posts widget, including thumbnails
WordPress comes with a Recent Posts widget that you can use to display a list of your latest posts in your widgetized sidebar, but it is really not very good in the fact that it does give you any control over your posts at all. So I have written a new one.
This is a very simple plugin, but it gives you much better control over your widget display.
Also includes ability to display recent custom post types