Images are based on the "Featured Image" selected on the Edit Post screen. If the option is not displayed, click Screen Options in the top right of the Edit Post screen and check the "Featured Image" checkbox.
Any new image added to your site should have a thumbnail created in the correct new size. However, the old thumbnails will need to be regenerated. This can be done for all images on your site with the excellent "Regenerate Thumbnails" plugin.
This issue is typically caused by templates that don't enable post thumbnails. If your template's functions.php file does not contain this, you must add it:
add_theme_support( 'post-thumbnails' );
The plugin will currently only display manually entered excerpts. Automatically generated excerpts will not be displayed.
If you get this error, it means that the permissions on your server aren't setup to let WordPress write directly to a file. To resolve this you'll need to temporarily change the permissions on this plugin's css and js directories, click "Save Settings" on the admin page, and then change the permissions back.
You can change the permissions on your server either by using SSH or a config menu on your hosting service's site (if they allow you to directly change permissions). With SSH access, navigate into the featured-posts-grid directory and enter "chmod 777 css js", click "Save Settings" on the admin page, and then change permissions back with "chmod 755 css js".