New Video Thumbnail Plug in question

So couple of questions here, first a guy just created a new wordpress plug in that is suppose to auto fetch a thumbnail from YouTube and Vimeo videos. It searches your post for embedded videos and returns the URL thumbnail for that video. I want to install this plug in could prove to be quite useful for me. I am pretty new to wordpress and and websites in general, learning about loops and templates as we speak. Here is what the guy says you have to do, ” All you have to do is place <?php video_thumbnail(); ?> in your template’s loop to retrieve the post’s thumbnail. Here’s an example:

<img src=”<?php video_thumbnail(); ?>” alt=”YOUR_ALT_TEXT” />”

So my questions would be first, where in the index.php would I add this as to not mess with any of the of the theme functions. As I do not fully understand the loop yet. Second is it ok to add this functionality to this theme? The featured image is great and very useful, but would also like this functionality to auto fetch certain video thumbnails. Any advice would be greatly appreciated I will copy and paste the full index.php to make it easy for you to explain where to put this inside the loop. Yes I know I am new but I am a quick learner. Thank you in advance…

Here is a link to my page I only have a couple of vids up for right now, just to test looks and everything..http://www.bohemianmonk.com/

I will post my index.php if this will help explain where to put the code in the loop…

[Code moderated as per the Forum Rules. Please use the pastebin]