I have found this tool to be great for resizing images for anything from avatars to wallpaper for the Treo 650. I think it is great cause it gets incorporated into the right click menu of XP and it automatically scales the image so there is no stretching or skewing of the image, just resized.

Image Resizer
This PowerToy enables you to resize one or many image files with a right-click.

Download Here(Direct) or Here(Windows website)