Funda Theme – Featured Posts Slideshow

I am using Funda, but this is common to many themes. There is a featured posts slideshow that show up to 5 pics, I guess. In any event, it says this to add them:

Last 5 posts form the selected categoey will be listed as featured at homepage.
The selected category should contain at last 2 posts with images.

How to add images to your featured posts slideshow?
? If you are using WordPress version 2.9 and above: Just set “Post Thumbnail” when adding new post for the posts in selected category above.

(The spelling errors are in the template)

I cannot for the life of me figure this thing out! There is no “Post Thumbnail” option that I can see. There is s link to make a pic a featured iamge, but it inserts it into the post, not to the slideshow.

Does anyone know the solution? Or is it easier to deactivate it and install an actual plugin?

Thanks!