1) The default file setting is not a default file that will be uploaded, it is the value that will be given to the server file name variable if no image is uploaded. It is more for the update page that for the insert page, though you could have a default filr hat is used in the case of the image not being uploaded already on the server, use that file name in the default image section to use. It is intended to be for use with files that are already uploded to the server.
2) In the case where you are uploading a large image and a thuimbnail image, you will want to be storing the image name in the two column of the database. In this case, you will have two hidden form elements to bind the default image for each one.