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if your using photoshop you can make it any size you want. You can:
a) save as .jpg, options are 1-12,1 being the lossiest and smallest, 12 the least lossy and biggest.
b) yes you can resize your picture either by scaling (i.e. changing the canvas size) or by changing the resolution. As far as resolution goes, 72dpi is standard for the web.
c) you can change the amount of colours in your picture. this is not really a cool thing to do. Simply saving as a lower grade .jpg is much more effective adn yirlds better results.
hope this helps,
G.
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