This function will display all children of a page along with the thumbnail. I have it setup with div class that will print them in a 2 wide grid. It calls the medium size. A couple of these things should be paramatized (is that a word?). :)

display_child_pages_with_thumb.php

function lpo_display_child_pages_with_thumbs()
{
    global $wpdb;
    global $post;

    /*
     * create a query that will locate all children of THIS page keeping
     * the ORDER in specified in this page.
     */
    $sql = "SELECT * FROM $wpdb->posts WHERE post_parent = " .
        $post->ID . " AND post_type = 'page' ORDER BY menu_order";

    // do the query
    $child_pages = $wpdb->get_results( $sql, 'OBJECT' );

    $html = "<hr />";

    // walk the pages we have found
    if ( $child_pages ) {

        /*
         * The $first variable is used to select the div elements that start
         * a new row, this is strictly for styling (.css) purposes.
         *
         * this is all within the context of the 'columns' .css selectors provided
         * by StudioPress.  You can roll your own, it's simple.  Ask me if you like.
         */
        $first = true;

        /*
         * every child page we have we are going to create a grid element (is that
         * the right word?)
         */
        foreach ( $child_pages as $cp ) {

            setup_postdata( $cp );

            // Get a 'medium' size featured image
            $th = get_the_post_thumbnail( $cp->ID, 'medium' );
            $permalink = get_permalink( $cp->ID );

            /*
             * This is where we create an alternating selector by turning the
             * 'first' class on and off to create a two column grid.
             */
            $class = 'guide-directory-grid one-half';
            if ( $first ) {
                $class .= ' first';
            }

            // set the column selector
            $html .= "<div class='" . $class . "'>\n";

            // Link the thumbnail image to the child page.
            $html .=
                "<a href='" . $permalink . "' rel='bookmark' title='" . $cp->post_title . "'>" .
                $th .
                "</a><br/>\n";

            // Might as well link the page title to the page as well.
            $html .= "<p class='guide-title'>" .
                "<a href='" . $permalink . "' rel='bookmark' title='" . $cp->post_title . "'>" .
                $cp->post_title .
            "</a><br/>\n";

            $html .= "<hr/></div>\n";

            // Toggle between being first and not first
            $first = ! $first;
        }
    }

    // spit it out
    echo $html . "<br class='clear' />";
}