large images used instead of thumbnails?

Hello
The plugin is great and does exactly what i want it to do.

The only problem is that, instead of neat, square thumbnails it is using the full size images and scaling them. This causes image distortion and a time hit, as the original images are large.

I am using the REGENERATE THUMBNAIL plugin, which was recommended, so the needed square thumbnails DO exist. i am not sure what to do now. Here is an example from my blog:

http://www.james-baker.com/news/2011/03/jet-kid-hola-gato.html

I use the SUFFUSION theme.

http://wordpress.org/plugins/yet-another-related-posts-plugin/