@bleen
1) The form being displayed in the ctools modal is NOT using the focal...

@bleen

1) The form being displayed in the ctools modal is NOT using the focal point preview image style to display the thumbnail. (In truth you can use any image style as the thumbnail has the same aspect ratio as the original image).

I tried to check that using inspect element and noticed that it is using image style "focal_point_preview", so i thought it is designed by that way.
As you mentioned, other work around was that modify "focal_point_preview" image style so that it should show image in proper aspect.