Pub 2003 copies inserted images, and makes a number of different file types
when you Publish to the Web, with the goal of providing the best image
depending upon the browser that is used to view the page...with mixed
results. You can do several things to work around this.

You can try to resize and optimize your image in a third party image editing
program before you insert the JPG, and then Format > Picture > Size tab and
make sure the image is scaled at 100% height and width. The result seems to
be the best quality inserted image...and sometimes the same file type
without conversion.

You should also go to Tools > Options > Web tab and uncheck "Rely on VML..."
and "Allow PNG...".

You should avoid trying to use word wrap, and sometimes overlapping images
with other design elements will result in a combined GIF image.

You can also import the image into your Publisher page and bypass the html
coding engine that converts/copies the inserted images. Importing the image
probably results in the best quality results, as long as you optimized and
sized the image before you imported it. You would use the insert html code
fragment box tool with a variation of:

<IMG SRC="http://www.yourwebsite.com/images/yourimage.jpg" ALT="The Alt text
you want to associate with the image" border="0" width="120" height="60">

DavidF