All of my thumbnails are distorted looking and not displaying correctly. You can see an example here
I have Retroarch 1.7.7 and I downloaded the thumbnails through the Online Updater. If I check the folders containing the thumbnails the images look fine, so the problem lies with retroarch.
Edit: I turned off my filters and the thumbnails look fine now. I had to set “nul” in the retroarch.cfg file of the retroarch directory, but supposed pressing start on the filter in retroarch will also disable it.