wheremyfilesat.com

omg thnx so much, that had been driving me crazy for sooo long

i was missing one simple line
set_post_thumbnail( 866, $attach_id );

i must have missed that on the codex somehow

here my final code incase it helps anyone

$post_id = 866; // this value is retrived with '$post_id = wp_insert_post(....)'
  $filename = "http://www.wheremyfilesat.com/wp-content/uploads/xelb1cnn.jpg";
  $wp_filetype = wp_check_filetype(basename($filename), null );
  $attachment = array(
     'post_mime_type' => $wp_filetype['type'],
     'post_title' => preg_replace('/\.[^.]+$/', '', basename($filename)),
     'post_content' => '',
     'post_status' => 'inherit'
  );

  $attach_id = wp_insert_attachment( $attachment, $filename, $post_id );

  $attach_data = wp_generate_attachment_metadata( $attach_id, $filename );
  wp_update_attachment_metadata( $attach_id, $attach_data );

  set_post_thumbnail( $post_id, $attach_id );

Thanks again