Hi TGack,
I think I've got a solution for you... I've managed to take my 6.5Gigs of photos and loaded it onto my ipod (via MC) where it only takes up 240Mb of space!
Aside from the space issue, I fould that when loading the full resolution images via MC, some of the photos did not resize well.
Soooo... I used Picasa to export each folder of photos to a new directory I'd created called 'My Pictures iPod'. The export feature allows you to batch resize all the photos in a folder to 320x240 (the resolution of the ipod video screen) in one hit. Do this for each folder, load "My Pictures iPod" into MC, use the Fill Properties From File Name" function to assign the directory name into the [Album] tag, and bob's your uncle.
That's all you need, to do, but being a newbie myself to this site, here's the more verbose version of the instuctions...
Create a new folder called "My Pictures iPod". and ensure your photos are loaded in Picasa.
In Picasa, click on a folder (in the left pane), click on one of the photos in that folder and hit ctrl + a, then hit ctrl + shift + s and it pops up a window. click browse and select the "My Pictures iPod" folder.
Leave the name of the exported folder as is, select "Resize to" and enter 320. Set image quality to 100% and "Export movies using" first frame.
hit OK, and you'll have a nice minitarised set of 320x240 photos into your new "My Pictures iPod" folder.
Do this for each folder in the left pane. Now, go to MC. Import the "My Pictures iPod" and all subdirectories into MC. Then select all of these files/photos, right click Library Tools | Fill Properties From File Name. Only check directories and enter [Album] in the field and hit okay.
And there you have it. 6.5Gigs of photos into 240Mb, and MC's handy features to assign the correct album name to them, oh yeah... and they display really well on the iPod video (guess they don't have to be resized)
Hope this helped