Hey.
Yes, you will need a image manipulation library to work with images, and GD is a very popular one. ImageMagick is also popular, and is arguably superior in both speed and image quality.
Thumbnail generation has been
discussed a lot on the internet already. See if one of the top Google results can't be of help to you.
If you can't get it to work, post your attempts here and we will try to point you in the right direction.