It seems that the custom video thumbnail has a file size limit (I think 25kb). If the user uploads a thumbnail larger than this (but still 256x256 resolution), the form accepts the value but does not upload the image. I suggest adding a check for file size as well as some instructions to the user to avoid frustration. Thanks!
I am still trying to figure out how to upload pics that's for example the viper you helped me on and the pic you sent me.. how do I add it to an upload or while uploading?