I don't know about a thumbnail, but to show the video instead of a link, when you go to create a post, click on this symbol..........



When you click on it, a drop-down box will appear, and it will show different video hosting sites.Your video on YouTube should have a link to share the video. This is the address you want to use when you click on youtube in the drop-down box. A smaller window will open to put that link and then click 'okay' and the video will appear as it did for me above.

I hope that made sense, I wasn't able to copy and paste the various steps. Its actually really easy once you do it a few times.