Hey mate,
1) Many users appear to be having the custom thumbnail problem however it's not on all channels. According to Team YouTube on Twitter it is a technical issue, not an update. Here are some replys they gave to users tweeting them about the thumbnail problem:
"There is a technical issue we're facing right now with custom thumbnails and we're on it. Appreciate your patience in the meantime."
"Thanks for reaching out. We've seen reports from users stating custom thumbnails are not appearing on the website and we're currently looking into it. Also, could you share more info and screenshots of the issue you're having with search results? We'll look into it."
"We've seen similar reports and are currently looking into it. In the meantime, could you try reuploading the thumbnail to see if that helps. Keep us posted."
YouTube has been testing auto generated thumbnails for over 6 months now:
https://www.polygon.com/2018/6/28/17513350/thumbnails-youtube-auto-generated-custom-test so it wouldn't surprise me if this was eventually a fully rolled out feature in the coming months/year.
2) I don't believe your deranked video has anything to do with this thumbnail issue. I don't see too many reports of mass derankings and my videos are all good so it might be more to do with your ranking method/strategy. In saying that, YouTube has been making changes to their algorithms more frequently so it's possible the drop was related to an update, who fucking knows.What it a blackhat or whitehat niche? How saturated is the keyword and what kind of search volume was it getting?