Yes, there were security vulnerabilities discovered in Timthumb which was why it was removed from ClassiPress. You can read more about this specifically in our
blog entry. I'm not aware of issues with the number of files generated by the theme, even a standard WordPress installation creates multiple thumbnails for a single image uploaded so this is pretty normal.
Ultimately if you're looking to change the way in which the theme works and add Timthumb for images, this would require customization of the default theme on your part. Our themes are not encrypted, so you are free to modify it if you wish. Thanks.