Here is a image to show you what rde talked about and I agree that it sounds like this is what you are doing.
Click on the image so you can read what I wrote on it to help explain what I did.
Grasping resizing or creating at the correct size is probably the hardest thing to explain in the forums. It takes a lot of trial and error until it just makes sense to you.
I think in this instance, you are seeing quality loss is because you are just resizing your image too much.
