The thumbnails must be stored in the /lib/<library_name>/thumbnails folder so the library browser can find them (This folder is opened by default when you click on the thumbnail button), the files must be copied before selecting them. However, to create the thumbnails easily, you can use the "Get Map" button. It renders and creates the image automatically using the selected material.
To backup a Library, you have to copy both the library folder and the referenced material library from the matlib directory. Since the .mat files are created by max, they are version dependent, if you create or edit libraries take care that the materials will be converted to your current max version and they will not be backwards compatible. Our libraries are created with Max 7 to be used in all supported versions.
We are working to improve the libraries in next versions to support for mesh objects and a more flexible file structure.