This is what I have in one of my mediawiki LocalSettings.php files and it thumbnails fine:

## To enable image uploads, make sure the 'images' directory
## is writable, then set this to true:
$wgEnableUploads = false;
$wgUseImageResize = true;
$wgUseImageMagick = true;
$wgImageMagickConvertCommand = "/usr/local/bin/convert";

but you might try
$wgImageMagickConvertCommand = "/usr/bin/convert";