This appears to be happening with 1.8.6.1 as well. Deactivating plugin allows saving of featured image. Screenshot shows blank checked image when enabled.
The same here after I updated to 1.8.6.1
No way to assign a picture from the library as a post-thumbnail.
Copied types 1.8.5 from harddrive to server to redo the update.
Now the post-thumbnails working again.
Hope for a quick fix from toolset.
This issue is known to us and our developers are working on it to fix it as soon as possible. Please be patient, I'll update you as soon as I've updates on this issue.
We already pinpointed the problem and a correction has been implemented and made available in your client download page. Types has been incremented to version 1.8.6.2.
Let us know if everything works out with this update.