I use PNG images exclusively using the "Save for web..." option in Photoshop. Each are saved at the lowest color depth possible which still maintains what I'd consider acceptable image quality, so as to minimize the size of each image file which ends up getting downloaded to the remote as an end result. Only on rare occasion will I save an image as a 24-bit PNG for instance. These are cases where severe dithering would occur otherwise as seen in the remote. As for JPG images, when you insert a JPG image to your configuration file the editor converts it to a 24-bit bitmap. As such, it is not possible to take advantage of the JPG format as you've outlined as said JPG files never make it natively into the XCF, much less get downloaded to the remote. JPG support is nothing more than a "let me convert that to a (bloated) 24-bit bitmap for you" which is the last thing you want if you are concerned about utilizing the paltry 64 megs of memory in the remote in the most efficient manner possible. During the beta test of the editor prior to initial release I tested out the JPG support which as documented clearly gives the user the impression the file type is natively supported. As you can imagine, with the large number of image files in my XCF I was extremely excited per the space savings JPG images would provide. Didn't take me but a few test runs to discover what was actually happening sad to say. While true JPG support never came to be I was hoping at the very least the JPG support provided would be clearly defined in the documentation. It was not unfortunately.