@neoleptic If you set a featured image for the post, it will appear as the highlighted image in the category view if you are seeing the category in excerpt view type (not full content view). But if you are including images within the post these image will appear in the single post view not in the category view if you are seeing the category in excerpt view.
@neoleptic the_content will show all the content along with all the included images and videos. For the single post view we have used the_content and for the archive/category/blog page we have used the the_excerpt code. If you also want to show the featured image please visit this page http://codex.wordpress.org/Function_Reference/the_post_thumbnail.
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