i'm not sure if your digital camera is like my camera, but i use the "best" quality option and then when i upload the pics onto my computer, i open them up into paint (which I assume you have)
There's a "stretch/skew" option under "Image" and you can shrink it 50% horizontal, 50% vertical or more/less depending on how big/small you want it. You jsut have to make sure you use the same numbers for horizontal and vertical or the picture will come out all weird. Maybe there's an easier way to do it but...that's how I shrunk my pictures.
If there is an easier way, can someone please tell me?