Currently the thumbnail generators do a really poor job with handling animated GIF, transparent GIF & transparent PNG images. They are often rendered with strange artifacts or other issues. I recommend that if an image is animated or has transparency, a thumbnail should be generated in the same (or comparable format). Additionally, if the image is the same size or smaller than the thumbnail the image should just be served instead.

Opaque PNG → JPEG
Transparent PNG (8 or 32-bit) → Transparent PNG
Opaque GIF → JPEG
Transparent GIF → Transparent PNG
Animated GIF → Animated GIF