Alright, rock and roll... While trying to figure this out I think I got a bit closer to better understanding filters. Although it doesn't work, so maybe not!
So here is my modified version for attempting to accomplish this (thanks Helga!).
function child_pages(){
global $post;
$mypages = get_pages('child_of='.$post->ID.'&sort_column=post_date&sort_order=desc');
foreach($mypages as $page)
{
$content = $page->post_content;
if(!$content) // Check for empty page
continue;
$content = apply_filters('the_excerpt',$content);
?>
<?php the_post_thumbnail(); ?><h2><a href="<?php echo get_page_link($page->ID) ?>"><?php echo $page->post_title ?></a></h2>
<div class="entry"><?php echo $content ?></div>
<?php
}
}
add_action('thematic_belowpost','child_pages');
I made a lot of revisions but what I have shown here is what makes the most sense to me. But neither of the two lines that I changed work lol... So rather than post all the possible variations I tried, I'm just going to ask for help with this one.
First one, attempting to apply the_excerpt filter to $content - it is still showing the post in it's entirety. According to what I'm reading in the Codex, this should work. The only reason it may not be working, I'm thinking, is if my pages don't contain the required <!--more--> tag. Could that be the case? Or is my logic incorrect?
Second one, adding the_post_thumbnail before the title (from the article soneal posted). Reading the codex my only thought was that maybe my theme didn't support it?
http://codex.wordpress.org/Post_Thumbnails
But then I found this in Thematic's functions.php so it must be ok, right?
// Check for WordPress 2.9 add_theme_support()
if ( apply_filters( 'thematic_post_thumbs', TRUE) ) {
if ( function_exists( 'add_theme_support' ) )
add_theme_support( 'post-thumbnails' );
}