Thanks for the tip Balinor! I just implemented this on our site, but our thumbnails aren't all that size - they are no larger than 150x150, but some of them aren't square, so the mod was stretching them.
I changed the line to this, which uses the thumbnail images - now I am NO coder by any stretch of the imagination, but it seems to have worked ok (I basically changed all pimage to timage)?
Code:
var="imageid" value=$wl_products[product].productid}{/if}{include file="product_thumbnail.tpl" productid=$imageid image_x=$wl_products[product].timage_x image_y=$wl_products[product].timage_y product=$wl_products[product].product tmbn_url=$wl_products[product].timage_url type=$wl_products[product].is_timage}</a>