There is a camera object (grey square with a black square lens on it) on the table that will take a "picture" of whatever it's pointing at when placed in the level. That picture will be the thumbnail when you upload a dream. This is the "easy" way to get the thumbnail.

If you want an actual custom thumbnail, you have to do a bit of file and timing manipulation. Firstly, make your dream and save it so that it is completed and ready to be uploaded. Secondly, make the thumbnail that you want for the level. The thumbnail needs to be 256x256 pixels and in .png format to work. Make sure you save the thumbnail as exactly "WorkshopThumbnail.png"

You will now need to find the folder that your dream is saved in. Head over to the folder
Each folder in here is a separate saved dream. Inside each one you will find a WorkshopThumbnail.png file. You can check these images to see which one matches up with the dream you made the custom thumbnail for. Once found, keep that folder open, as we will need to copy the thumbnail you made over at a specific time.

Head into the office and load your dream. This will set a flag telling the game that the thumbnail has already been "saved." From this point onward, make sure you don't leave the office or go near the office door. The thumbnail will get overwritten and the flag to save it again will be set. Now, while staying inside the office, you want to pause the game and move your custom thumbnail that you named WorkshopThumbnail.png over to the dream folder to replace the one that's there. Once moved, save the dream again. Your custom thumbnail should take the place of the game's created one on the cork board. Load the dream once again before uploading it to the workshop for it to be used and set properly. The monitor next to "NEW DREAM" will display the thumbnail. You can check this to make sure your custom thumbnail is on it before uploading.

Thanks! I thought it was a decoration object that didn't appear for some reason