It depends how you want them displayed. All options can be used, but the size you choose to insert will then be the maximum size the image will show.
In fact even with your previous theme you were inserting them in a non-optimum way since users were downloading the full sized image.
With this responsive theme:
If you want a full width image then insert the original or Large size and the theme will let it fill space available.
If you are wanting an image to be wrapped by text then choose medium or thumbnail.
If image is larger than available space, it will fill that space.