Change the showpost number from 3 to whatever number of posts you want to show.

<?php
/* Start the Loop AND limit the # of posts*/
$page_num = $paged;
if ($pagenum='') $pagenum =1;
query_posts('showposts=5&paged='.$page_num); ?>

You have to place it just before:

<?php while ( have_posts() ) : the_post(); ?>

the_post_thumbnail(); // without parameter -> Thumbnail
the_post_thumbnail('thumbnail'); // Thumbnail (default 150px x 150px max)
the_post_thumbnail('medium'); // Medium resolution (default 300px x 300px max)
the_post_thumbnail('large'); // Large resolution (default 640px x 640px max)
the_post_thumbnail( array(100,100) ); // Other resolutions

http://codex.wordpress.org/Function_Reference/the_post_thumbnail