I had the same problem, but apon reading the faq's I went to Photobucket and whalah Ive never looked back. Photobucket takes ages to load for me but worth the effort.
I loaded Lucky's picture today. I kept resizing it but I had a hard time getting it small enough to load. The server kept rejecting it. I finally noticed the setting on my Picture it Publishing program for "Save as a Web-ready picture", thumbnail size. That finally worked for me.
I've been trying to figure that out myself for quite some time now. Finally took the time to get the right info (thanks to newchickenmom and to Nifty for the link in the FAQ's pages) and......voila. This is my Tootsie girl. She's my baby.