Post thumbnails not working in backend

WP 3.3

Adding thumbnail support to theme does not display an option to set the post thumbnail when creating post, nor is there anything in the screen options.

The only option to show is to set a featured image.

Setting the theme thumbnail support in the functions.php file

add_theme_support( 'post-thumbnails' );
set_post_thumbnail_size( 130, 130, true );

Has this feature been dropped in ver.3.3?
I can’t find any thing that say’s it has.

Is there a new way to set thumbnails?

What options are you seeing when you click on the Upload/insert media (Media Library browser) above the editor?

Just get the normal options, whether uploading, or using a previously uploaded image;
Insert into post
Set as Featured Image

Seems to me I should have a meta box on the right of the editor to set the thumbnail.

No, WordPress only has the featured image box, no other thumbnail boxes, so your panel displays correctly.

So, am I setting the featured image or inserting into post?

How does this know what is the thumbnail?

<?php if ( has_post_thumbnail() ) {
} else { ?>
<img src="<?php bloginfo('template_directory'); ?>/images/default-image.jpg" alt="<?php the_title(); ?>" />
<?php } ?>

Got it, have to set Featured image.

You can specify which size you want by adding the according parameter, like so:

<?php the_thumbnail('medium'); ?>

I’m using a function for the size

add_theme_support( 'post-thumbnails' );
set_post_thumbnail_size( 130, 130, true );

Plus I always size and optimize all my images prior to uploading.