The thumbnail issue still is present on iOS 9.3.4. But based on the info in this thread coupled with some experimentation, here's another pattern I found which may be helpful for those trying to work around this ridiculous issue, without having to manually re-add artwork on all videos.
I had some videos from iPhone/iPad which were filmed in "Portrait Mode" and others in "Landscape Mode" (holding the camera upright versus sideways). This is the key differentiator that helped me fix it. The Media Kind "Movie" will only show thumbnails for the former while "Home Video" shows the latter! This is due to the native aspect ratio of the video, and the way Apple’s software interprets it.
Thus, in iTunes, right-click to do Get Info on all "Portrait Mode" videos and change Media Kind to "Movie". Then on all "Landscape Mode" videos, change Media Kind to "Home Video". If these are mismatched, looking in Videos on iOS you will see some thumbnails are missing and others are not. But if they are correctly sorted, all thumbnails show up!
One last observation - after making these changes and clicking “Sync” in iTunes, I found that some videos would just get the “spinning circle” and not play, as others in this thread mentioned. It seems the iOS device can get confused by changing the Media Kind. There are several ways to fix that. Un-sync the video from the device, then re-sync it – you need for it to show on Step 6 “preparing to copy items” and then see it actually re-copy over the videos in question. Alternatively, exit iTunes, fully close the Video app by double-touching the home button and sliding it up (or just reboot the device), then re-sync a second time – which usually helps it to detect the file changes.