RoadRaven, I don't downsize photos when I upload photos to an online album like Photobucket. I think it will do it for you. You can then link to photos in TE and it does the resizing or whatever it needs.
However, this doesn't mean that when your photos are uploaded to the online album that the same degradation of quality won't occur. Try one of the free services (such as photobucket) and run some tests. Won't cost you anything but time.
PS -- all the above said on my very limited experience.