Hey there! I just tested it myself and there might be some confusion here on how this works so I can explain a bit further. Feel free to let me know if you still have any other questions.

The thumbnail URL only works when you're creating a link post (e.g., when the URL field is filled in). This is used when you want to show a different thumbnail image than the one that Lemmy fetches from the original link. If you try to fill in the thumbnail URL for a image or text post, it won't end up doing anything (this might be where the confusion comes in).

If you want to create a post with an image, you can simply upload the image (the button beside the URL field) and Lemmy will automatically generate the thumbnail based on the image you uploaded. Hope this helps!