Hi,
The file does not exist and should not need to exist if the .ashx extension is configured correctly, but you can possibly/probably fix it by creating a text file in the root named thumbnailservice.ashx and inside the file just put this:
<%@ WebHandler Language="C#" Class="mojoPortal.Web.Controls.Album" %>
I will add this file for the next release to avoid this configuration problem.
Hope it helps,
Joe