Perhaps this is because vBulletin changed the return type of fetch_thumbnail_from_image to an array? The filedata is stored in key 'filedata', for example $thumbnail['filedata']. This is just a guess, I don't have this hack installed.
Edit: ya, #16 in the install file uses this function call, you probably want to change it to:
PHP Code:
$thumbnail = fetch_thumbnail_from_image($image); //Take out second parameter.
$thumbnail = $thumbnail['filedata']; //Add this line.