I would recommend creating a handler that can re-size images for you on the fly and encode them in whatever format you like.. kind of like a thumbnail generator.This will cost CPU on the server but you can cache images and severely reduce bandwidth costs ETC. Let me see if I can find the link to a good article I read on something similar.
You can look at
[this article] it isn't the one I had read but it has some info about how you can go about implementing this.