with a memory friendly in-place library like vips I think we will be oky. Since the user just waited like 10-15 minutes to upload their huge image waiting an additional 10-30s at that point for thumbnail and "instant gratification" of seeing your image on the upload page ... is not such a big deal.
Well, what about the 5 million other users browsing Special:Newimages? We don't want 50 simultaneous attempts to build that first über-thumbnail. :)
Thumbnail generation could be cascaded, i.e. 120px thumbs could be generated from the 800px previews instead of the original images.