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I cannot reproduce your symptoms - the options seem to work fine here.
If I do not have those options ticked then I get the files "c2o_resizedcover.jpg" and "c2o_thumbnail.jpg" generated and stored with each book. Ticking those options causes the files to be removed.
Are those the exact file names that you are seeing? If not there is a chance that they are remnants from an earlier release that were not removed for some reason.
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