oops... lots of mistakes in that one. I forgot to change all the other variables to represent the loop you are in...
Code:
{include file="product_thumbnail.tpl" productid=$products[prod_num].productid image_x=$product[prod_num].image_x image_y=$product[prod_num].image_y product=$products[prod_num].product tmbn_url=$products[prod_num].tmbn_url}