I know this is an old thread, but for anybody else with problems, you don't really need any other software to reduce image sizes if you're using XP.
Open your image
(right click on it then) Open With > Paint
(at the top click) Image > Strech/Skew
(if you're using a 5 megapixel camera or above) reduce the Horizontal and Vertical % down to about 25 or 30% and your image should now fit on screen easily.
Save as JPeg and the image should be about 60 - 100Kb