If you are not using the “Movie.metathumb” filename method, “Movie.jpg” works fine too. I use that for all of my movie thumbnails without any problems. I prefer it, because it is more logical and unstandable for me. A JPEG file should be named with a “.jpg” filename extension. I don’t know why they changed this. WDTV Gen 1 used the “Movie.jpg” filename method.
For folder thumbnails, I use something like this “!.methathumb”. This forces WDTV to read it as the 1st filename in the folder. I also have a copy of the same file and its named “Folder.jpg”. This way I can quickly review what it looks like through windows explorer window or a image program, like Google’s Picasso photo viewer. My thumbnails of 120x180 show up fast and fine. The largest thumbnail images I use go up to 333x500 if I have a lot of detail, like smaller printed words, but usually I use the 120x180 size.
