Widget : Recent Posts by Category Thumbnail Only

Go to "Design" => "Page Elements"
"Add a Gadget" => "HTML/JavaScript"
Copy and paste the codes below
<style>
img.label_thumb{
width:172px;
height:104px;
margin-right:0px;
margin-bottom:10px;
}
</style>
<script type='text/javascript'>
//<![CDATA[
function labelthumbs(json){document.write('<div>');for(var i=0;i<numposts;i++){var entry=json.feed.entry[i];var posttitle=entry.title.$t;var posturl;if(i==json.feed.entry.length)break;for(var k=0;k<entry.link.length;k++){if(entry.link[k].rel=='replies'&&entry.link[k].type=='text/html'){var commenttext=entry.link[k].title;var commenturl=entry.link[k].href;}
if(entry.link[k].rel=='alternate'){posturl=entry.link[k].href;break;}}
var thumburl;try{thumburl=entry.media$img.url;}catch(error)
{s=entry.content.$t;a=s.indexOf("<img");b=s.indexOf("src=\"",a);c=s.indexOf("\"",b+5);d=s.substr(b+5,c-b-5);if((a!=-1)&&(b!=-1)&&(c!=-1)&&(d!="")){thumburl=d;}
else thumburl='';}
document.write('<a href="'+posturl+'" title="'+posttitle+'"><img class="label_thumb" src="'+thumburl+'"/></a>');
if(i!=(numposts-1))
document.write('');}
document.write('</div>');}
//]]>
</script>
<script type='text/javascript'>var numposts = 7;</script>
<script type="text/javascript" src="/feeds/posts/default/-/YOURCATEGORY?orderby=updated&alt=json-in-script&callback=labelthumbs"></script>

numposts = 7; <-- Number of posts to show, change it as you wish
YOURCATEGORY <-- Replace with your category/label name

Play the images css code
This is standard ccs code. The images will appear downward. Change the value of "width" and "height" as you wish.
img.label_thumb{
width:172px;
height:104px;
margin-right:0px;
margin-bottom:10px;
}
You can add "float:left;". The images will appear leftward. set a value for "margin-right" to make a space between images. Example,
img.label_thumb{
float:left;
width:172px;
height:104px;
margin-right:10px;
margin-bottom:10px;
}

Make framing images. add "padding" and "border". Example,
img.label_thumb{
float:left;
width:172px;
height:104px;
margin-right:10px;
margin-bottom:10px;
padding:5px;
border:1px solid #ccc;
}

Click here for solution of Templates Error or Not Work Properly, slideshow not work, etc