When you click Change Thumbnail, there should be a drop down menu with the following options in the Delete current thumbnail Box (since that's what regenerates it):
- Fit width
- Fit height
- Fit width and height
Here's an example of an image that looks bad with the current thumbnails.
Edit: It would also be useful to set the default behavior.
Edit 2: I'm thinking the setting should be saved with the media so that it will still work properly if the thumbnail gets regenerated later.