Hey, sorry for the late response!
1. Yeah, we are already working on expanding this feature to this plugin as well in the near future, but for now, this is only available to our users of the 'Related Posts by Zemanta' plugin (which you can find over here). There should be at least 30 related posts to pick from, after you click on the 'Edit Related Posts' button, if your blog has that many to choose from.
Other than that, these two plugins are basically identical, apart from a few extra features. I recommend you to try it out and let me know what you think.
2. We also have a different thumbnailer on that other plugin that should handle images better, although we're not 100% positive about it. Any chance you could let us know?
Also — have you tried selecting an images as featured? Our plugin should prioritize those images when making new thumbnails for your related posts.
Let me know how it goes or if you have any more questions! I'm eager to find out!