I am trying to find a way to create a playlist of videos uploaded to a website.
What I am trying to find out is, does Flash Media Server have a component that
when a video is uploaded it will generate on the fly a jpg thumbnail of that
video? What I am trying to do is create sometime (on a much smaller scale) as
youtube. Will purchasing Flash Media Server help me accomplish that? Or does
anyone know how youtube created their thumbnail images of the videos?

Thanks

No... FMS does not have such capabilities. You would need to use a program like
ffmpeg to handle the thumbnail generation ( see article for example:
http://www.db75.com/blog/archives/000176.html ). I would imagine youtube does
something similar.

You can also show the first frame of a video with actionscript on the client
side, by loading the video and stopping on the first keyframe.

Hello,
Heres a tute on just the thing you are looking for
http://www.adobe.com/devnet/flash/articles/video_player.html

It creates video thumbs on the fly from an xml file which could of course be
generated on the fly
Needs flash 8 to edit the fla but otherwise all files are external.

Hope this helps.