It sounds like the aspect ratio of the thumbnail is different than the aspect ratio of the original picture therefore it's distorted when you force it to resize at the thumbnail dimensions. What if in your graphics editing program you check "lock aspect ratio" (or something similar) when resizing and only enter either the width of the thumbnail size and let your graphic editor choose the height to keep the aspect ratio correct. I would probably edit the template and change height="289" to height="" in the <img...> code.
This will force the thumbnails to what ever the width is but not force a height and that way they will display in their proper aspect ratio.
Make a backup of your template first.
If you're just dealing with a template then it won't be automatically creating the thumbnails for you. That requires a script of some kind and software on the server (for lack of better explanation).