What version of Premiere Elements do you have and on what computer operating system is it running?
Could you clarify what you want to do...is what is described in this YouTube article what you want to do?
You say that you are "trying to make a custom thumbnail of a video.....". Does that mean that you want to
take a freeze frame from the video as your thumbnail?''
What kind of a project is this thumbnail to be use for HD 1920 x 1080 or 1280 x 720 or SD?