Google's Picassa and The Gimp are both free and will very likely make a thumbnail for you but I don't know, I've never done that myself. I've never used Picassa but I have used the Gimp and The Gimp will certainly resize a pic so if making a thumbnail is merely reducing a picture's size then yes, it will do the job.
I do suspect that what you want is a small pic that reverts to full size when you click on it though in which case sorry, I'm not sure.
Anyhow, The Gimp and Picassa - both free. Perhaps worth checking their sites before download/install to see what they can do.