Thumbnails don’t get embedded in the “Featured Image” portion, but you can insert it into the template this code:
<?php has_post_thumbnail() ? the_post_thumbnail() : tern_wp_youtube_image(); ?>
I have this problem as well at my webpage. It seems what the plugin needs to do is to check for captions and replace it with the new HTML5 equivalents of <figure> and <figcaption>.
