Hi Jo
To display an image for a post when on the blog index page or blog archives, you should set an image as the post’s ‘Featured Image’ – by default on the right-hand side below the Categories and Tags area of the post editor.
Any images within the post’s content are stripped out on the blog index and archives.
Without getting too technical, the theme uses the core WordPress excerpt function to display a snippet of the post content. This function strips out images from the post content.
So, on your blog index or archive pages the theme will display post excerpt if a manually added excerpt exists along with the featured image if this exists, if no excerpt then it displays a short intro from the post content along with the featured image if there is a featured image set for that post.
Some themes just display all of the post’s content on the blog index as well as on the single post’s page, so you would have to scroll through all of each post’s content before seeing the headline/title/featured image of the next post in the list.
We made the Exoplanet theme this way as we feel that it is better for SEO and readability purposes to display a short intro on the blog index and then the full content only on the single post’s page. It also gives you more control over which posts to display an image for on the blog index.