As I see on your blog you show in the topmost (latest) post the_content with the images in there. This is the post put out in index.php inside the div id="front-list".
The following posts in div id="paged-list" show only one image and the excerpt.
You know this already...
In div id="paged-list" is a code to get the first image of your post or get your custom image from the custom field, whatever you set in theme admin panel. Following to this image is here in paged-list <?php the_excerpt() ?>.
In the upper part of index.php the stuff works different, it will show the_content and you might additionally give it an image via the custom field 'Image'
In front-list is no code to get an image from the posts content, so by replacing the_content with the_excerpt you get just a short text and no image.
So if you use just the excerpt you have to set an image manually via the custom field and set in themes admin panel to use image from custom field plus the size you like to have it.
You might use the auto insert function for images in the lower paged-list, this works not in front-list because there is no code for this.
I can't explain you easily how to get this auto-insert-code to the first post. It can't be done just by copy and paste from below to up because of the size values it reads from different admin settings.
First I would try to set an image in the custom field and tell the theme to use it with the size you set somewhere. If you get this to show up on top of your latest post,
I would replace <?php the_content('Read the whole story »'); ?> with <?php the_excerpt() ?> in index.php to show only some text below.
Another way would be to delete the complete div id="front-list" stuff and remove the offset in paged-list to show all posts and not starting with the second one.
KEEP YOUR ORIGINAL THEME FILES IN A SAFE PLACE AS BACKUP FIRST OF ALL!
