I had this same problem. I couldn’t work out why some images I uploaded early in my development process where showing thumbnails and others uploaded later were showing the full image constrained to 120px wide.
Finally realised it was because I disabled the Medium image size by setting both width and height to 0. It obviously uses the Medium image if available, and if not defaults to the full size. I just set Medium to 120×120 and regenerated the thumbnails (http://wordpress.org/plugins/regenerate-thumbnails/) and now all good.