Hi Ben….it won’t matter where the images are. The key is that if a post has a “featured image” attached to it, and shows up in the blog, it should show in any plugin that displays thumbnail based “recent posts” widgets. Would it be possible to get access to your site admin and I can see what is happening if it’s something in the theme or if something was missed or perhaps an issue with the plugin? If so, contact me from the support form with login details.