I think I found a bug in the parsing of the image choices.

I created a list of several articles as follows:

Image Choice 1: First Image Tag
Image Choice 2: No Image
Image Choice 3: No Image
Image Choice 4: No Image
Image Choice 5: No Image

All of my articles have image tags in them, so the Latest News module will display thumbnails of the first image from each article. That works fine.

However, the first image in some of my articles isn't the same one that I want to show up as the thumbnail in the list produced by the Latest News module. So I edited the first article in the list and configured it with a Joomla Intro Image for that specific article.

I then updated the Latest News module configuration as follows:

Image Choice 1: Joomla! Image Field Intro
Image Choice 2: First Image Tag
Image Choice 3: No Image
Image Choice 4: No Image
Image Choice 5: No Image

The Latest News module now produces a list where for the first article in the list, it displays the article's custom configured intro image (this is correct). However, for all of the remaining articles in the list (which don't have an intro image configured for the article itself), the module is showing the "Default Image" (the newspaper that says "extra extra") instead of moving on to Image Choice 2 which is configured to be "First Image Tag."

If I'm understanding things correctly, I believe this would be a bug. I don't personally need this fixed as I have a workaround I can use, but I thought I would make you aware of the issue at least. FYI.