Hi @marketinghits,
First, it’s not recommend to do that, the proper way is to specify intro / full image via article manager.
Since the template is built within JLayout, it’s a bit complicated to choose display image from article as intro only when Intro image is not specified. The only option is to open file templates/ja_magz_ii/html/com_content/category/blog_item.php and look for this code :
<?php echo JLayoutHelper::render('joomla.content.intro_image', $this->item); ?>
and replace with :
<?php
$first_image = '';
if ((preg_match('/<img[^>]*>/i', $this->item->fulltext, $matches ) == 1))
echo $first_image = $matches[0];
?>