Newpost Catch is a free WordPress widget plugin that lets you display thumbnails in new posts setting widget. The plugin allows you to set thumbnail size (Width & Height), number of posts to display, display date, display sticky post, even you can set categories to display etc.
Installation & Usage: Install and activate Newpost Catch plugin. After activation visit your admin area Dashboard -> Appearance -> Widgets page then drag its widget to your sidebar and set your display options.