The problem is that the Kindle sees an ASIN (usually a fake one unless the book came from Amazon) and assumes the thumbnail is on Amazon's servers. So it will try to download one, which fails, and there is no fallback to extract the cover thumbnail from the ebook file.
If the book is a Personal Document (has the Personal banner) and it doesn't come from send-to-Kindle, then the Kindle itself would extract the thumbnail.
Why Amazon feels the need to be silly and host the thumbnails on their servers rather than always extracting them ondevice, I do not know. Presumably someone was feeling incredibly cool that day.
