Hey RockWildaz
I think your problem may not neccessarily be the cache folder but how you are displaying the thumbnail. There are a few things you can check if you tell it not to cache the pic the image HAS err SHOULD
show up immediately. You can change that by setting the standard 30 minute cache to 0. Make sure you clean your sites cache after making that change. That should at least show the image. Once you have done that check if the image link is correct.
I found in Gk V1.3 the image class (image.class.php) inside the module itself is adding the module name to the filename it creates for the cached image. The problem is that GK1 isn't pulling the image by that name. I could imagine the same happening in GK4. Don't know why it does that though. Best is to use "FireBug" in Firefox to see the actual location from which the page is trying to pull the thumbnail and comparing the names if that doesn't match (aka name is wrong) check the gk.thumbs.php in the gk_classes folder. and see if the error is within that file.
I hope that helps.
Phil