Anybody Know Why

Anybody know how to reduce a photo to fit across the blogspot header in a decent size? When I reduce the size to about 600 pixels in an image editor, which is about the width of a web page, it gets all pixellated. This makes no sense to me since the quality shouldn't be less by making it smaller. It's almost as if Blogger stretches it out again. A few others have had similar problems. Any Blogspot bloggers out there care to comment?