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I've changed the thumbnail size in the settings but they're still too big/too small.

You may need to rebuild your thumbnails. The easiest way to do this is probably using this plugin: https://wordpress.org/extend/plugins/regenerate-thumbnails/

How can I make these thumbnails list horizontally instead of vertically?

CSS similar to this should work:

.widget_recent_thumbs ul { list-style: none; }
.widget_recent_thumbs ul li { display: inline; }