I have the following settings in 'File Uploads': Thumbnail Width: 300px, Thumbnail Height: 300px;
When I select 'bounded size' when making a thumbnail (in either Manage Media or while uploading a popup image in an entry or page), one would expect that either the width or the height of the thumbnail will become 300 pixels (whichever is the biggest).
However, the result is like this:

The resulting image is 300 * 240 pixels (yay!), however, it has cut out a part of the picture that I did not select, and fills up the bottom with a nasty black area.
Something similar happens when I select 'Fixed Proportions' or 'Free Crop'.
Another issue, not totally unrelated: it is impossible to enter a value greater than 999 in the fields for thumbnail width or height in the configuration of File Uploads. This is going to cause problems.