One of my pet peeves with the HTC Thunderbolt was it's use of Facebook photo's without a clear cut process to select the photo's you want to use for your contacts.
After a lot of research I finally figured out how to do it. Here are the steps:
On the Main screen click on the "People" app icon.
Select the individual you want to add or change their photo.
In the upper right corner of the screen click on the Link icon above the word Phone.
Next click on the image icon to the left of the person's name. A "Select Contact Photo" pop-up will appear providing options to select either "Gallery" or "Camera". If you select the Camera option the phone camera will turn on so you can take a picture. If the photo is already loaded in your camera, then select "Gallery".
Next Select the Ablum" where the photo is located.
Select the photo you want to use. You may have to resize the photo to get the image you want.
Select "Save". If the image is what you want to use press" Done".
The new image for that person is now set.