There does seem to be a bug in the Javascript behind those dropdown boxes for some browser versions. When a member has a large number of photos in a single album, the photo selection box does not show any photo files after the album is selected. Coach, you might be running into that problem. I am stumped on this one.
If you want to use thumbnails, you can insert them manually and link to the larger file. It's too late for me to go into the exact instructions, but looking at these two links, the first to the image, the second to the thumbnail,will give some of our web-smart members a hint and they can post details [

] To get the thumbnail, just add the /tn folder and prepend tn_ to the file name. To get the link to the filename, look at the properties of the window that pops up when you view a picture. I'll try to get this bug squished as soon as I catch up on some sleep!
http://www.penturners.org/oldalbums/coach/pregame1.jpg
http://www.penturners.org/oldalbums/coach/tn/tn_pregame1.jpg
One PS... you might wonder where the thumbnail comes from... The server creates it automagically when you upload a photo. You might notice a slight difference (other than size, obviously) between the original image and the thumb. To make it a little clearer at the small size, the image processor "sharpens" the image a little (removes color noise).