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Go to your gallery, when you hover over the links to your folders a little button should show up with a pencil inside of it, click that button, then click "Edit this Widget", in the "Display as" section make sure it is set as "Tumbs" and also make sure that "Hide labels on custom icons" is selected.
Once inside a folder that you want a specific picture to represent, go to "folder Options" go to "Icon" then click "Change Icon" then select the image that you want.
when cropping the picture- make sure that you only select the inside of the red line then crop, otherwise it will be too big.
And don't forget to type the folder name inside the given area, or anything else you want to put there, just don't leave it blank, people will get confused