RE: How Featured Posts Works
I was reviewing this topic and I found this statement regarding the plugin: "Even though FeaturedPosts is very powerful, it works in a very simple way: it shows the latest posts which have a Featured Image attached to them."
Based on my experience, the plugin appears to pull all posts with or without a featured image if you have selected "Any Category" as the Content Category. So if you are trying to "limit" featured posts to a sub-selection of your posts, establishing a category such as "featured" and applying this to your post will provide a more targeted approach.
I'm open to some recommendations on how to incorporate this into the Codex.