Thumbnail images show up automatically within a minute or so of transcoding/upload completion, depending on your connection speed. Custom Upload of Thumbnail Images is currently not available.
The two workarounds are1) to place the desired frame in the first 10 seconds of your video. The desired image will then be available in the natural menu, or upload a short video of just that image first. After the thumbs have been processed and show up, change the video file to your desired main video. Change File is at the bottom of Details tab in Settings. 2) Display Thumbnail Hosted Off Site
The word "Display" in this case is purely a noun, not a verb. The name of the feature is The Display Thumbnail. There is no way to turn off this feature. The option is all about customizing what thumbnail image is seen. You can certainly upload a blank image if you do not want a thumbnail image shown. But more to the point, you have the capability to upload any image you wish to display in that thumbnail image placeholder.
If you do not upload an image, the system will grab an image from the video during the transcoding process when you upload. If you do not upload the video, there will be no automatically placed thumbnail image and you will need to upload one or place by off site URL if you wish there to be an image.
Step 3. Click on the Thumbnail tab. From this pallet you can choose images by clicking, delete images by clicking the DELETE button and upload new images by clicking the Upload an Image button as shown below.
The DELETE button for each image appears at rollover.