Can't get thumbnails for homepage summaries to show up automatically

I have a blog that uses the Revolution Lifestyle theme and when an article is posted on one of the main categories a summary shows up for it with a little bit of text and a thumbnail to the left of it.

Well, it’s supposed to pull these images automatically somehow but it’s not… all I get is the red X as it’s looking for a picture called thumbnail.png… which sure I could fix that by putting a pic titled thumbnail.png in my themes image folder but that will make ALL the new posts have the same thumbnail.

I did notice in the home.php file that it has this code but I have no clue how to make this work..

<!--This is where the thumbnails are found for the homepage bottom section - note the custom field name for this image is "thumbnail". Recommended image size is 70x70, as the stylesheet is written for this size.-->

				<?php $recent = new WP_Query("cat=3&showposts=3"); while($recent->have_posts()) : $recent->the_post();?>
				<?php if( get_post_meta($post->ID, "thumbnail", true) ): ?>
				    <a href="<?php the_permalink() ?>" rel="bookmark"><img style="float:left;margin:0px 10px 0px 0px;" src="<?php echo get_post_meta($post->ID, "thumbnail", true); ?>" alt="<?php the_title(); ?>" /></a>
				<?php else: ?>
				   	<a href="<?php the_permalink() ?>" rel="bookmark"><img style="float:left;margin:0px 10px 0px 0px;"  src="<?php bloginfo('template_url'); ?>/images/thumbnail.png" alt="<?php the_title(); ?>" /></a>
				<?php endif; ?>
				<b><a href="<?php the_permalink() ?>" rel="bookmark"><?php the_title(); ?></a></b>
				<?php the_content_limit(80, ""); ?>

				<div style="border-bottom:1px dotted #94B1DF; margin-bottom:10px; padding:0px 0px 10px 0px; clear:both;"></div>

The post itself doesn’t have an image in it and I tried adding one and that didn’t work.

Any help?