Does anyone know of any free frameworks that help you create thumbnails for web pages, that when clicked, the original image loads ontop of the page (modal like), as oppossed to opening a separate page. Thanks!
This is really 2 questions in 1. The "lightbox" display of the original, larger sized, images in a modal box is handled in JavaScript with a library such as ThickBox. The resizing of the images can be done manually, or via some kind of code on the server side. Sitepoint has a decent guide on how to resize server side with PHP. I hope this helps point you in the right direction.
I've used DhoniShow a few times in the past, and clients really liked it. It's not AJAX, as it loads all the full sized images on page load, but if you were motivated I'm sure you could make that change pretty easily.
As have been already said, you can use Lightbox to get the effect to the user, I would use it with its ajax mode, loading the thumbnail as its contents.
Now for the thumbnail, I would recommend you something like http://megasnaps.com/ wich you can use for free.
Good luck.