I’ve already talked about most of the details in this devforum post, but to add onto it, I think auto-generated thumbnails are stretching because it’s generating an icon, 512x512 image, for a canvas that’s 1280x720.
Here is a second, more clearer example.
Expected behavior
I expect for the thumbnail to auto-generate a thumbnail that’s appropriately sized, whilst also keeping the auto-generating an icon the same appropriate size as well. (so the inverse doesn’t happen)