I've noticed that the image gets smeared once i resize it smaller
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Resizing Image "Smudge" It
If you mean the "thumbnail" feature of WordPress, that's possible. If you manually change the Width and Height attributes of the IMG element, that will definitely happen. If you only need one size image, use a decent graphics program to resize it before uploading.
Best option for more than one size: Use Flickr to host the images. They generate a range of sizes for you to use.
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