I think twistedsymphony is right regarding changing thumbnail sizes; as far as I can tell, it only applies to newly uploaded images.
And I’ve had very little luck with the alignment settings. I usually want left or right alignment, with text wrapping, but I can’t even seem to make that work, so I’ve been manually removing the “class” attribute WP adds to the image that’s supposed to define the alignment and using “align=’right'” or whatever instead. For centering an image without text wrapping, I usually find that putting it between <center> tags works the best.