The new thumbnails look a lot better. The problem was the edges between dark and light parts were jagged. I noticed that the new pics are twice as big than the old ones (kB wise) so it was probably a too agresive compression setting.
I've recently had the opportunity to test Macromedia Fireworks, its not great for editing but has a fantastic export utility that does a great job of optimizing the pics for web publishing - but if you already have Photoshop I wouldn't switch to anything else.
Which sotware do you use for the website design&publishing (I'd guess Frontpage since your Apache server has the Frontpage extensions installed)?

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