Sorry, you've got me stumped at the moment... The only thing I can think of is the usual troubleshooting step of "what changed around the time this happened" in your install. If nothing truly changed then that pretty much just leaves the server. You've probably thought of this stuff already, but a few ideas:
- Log off & back on in case it's a user level / cookie thing.
- Disable plugins one by one, testing each time. I've had functions broken by plugins in very non-intuitive ways.
- Check with your host to see if PHP security or the upload path has changed somehow.
You can fake a thumbnail by hard-coding the image size you want into your (X)HTML, i.e
<img height="150" width="100" ...>. This does not create an actual thumbnail file, and has the added drawback of not provding any bandwidth reduction because the full file is still downloaded to the browser.
There are lots of image editing programs that can make thumbnails on your computer, then you can upload them. Some can automatically batch process lots of images at once. Some are free. I've never heard of an FTP application with this built in, though. Try Googling "thumbnail image editor" or similar.