okay... not sure which version you are using, so I hope this works (it did for PSE3 and PSE4)

Open your original file.

Go to FILE>SAVE FOR WEB
Enter 500x500 for the size, bicubic, constrain proportions and click "apply"
Enter about 80 for the quality (this is where is will adjust the kb size to 125)
Check "optimized" and "ICC profile"
You do not want a matte around it (if that option is available)
Hit okay, and save your file with a new name
(even putting "web_" at the front of your current name works)

Let me know how you make out.

__________________
Colleen in Friendly Manitoba...
Proudly selling digital designs at SBB
(Come take a peek at my Gallery or check my BLOG to see what I'm up to)