When you hit the edit button in the picture and fax viewer it opens mspaint. When saving from paint it sometimes defaults to bitmap if you edit the picture at all. You will have to manually choose jpeg from the save as type menu when saving from mspaint.
I'll try to think up other things if that is not the case.
Ah... When rightclicking and hitting save picture as (or clicking the little save button that pops up) you will have the choice of save as type. Choose the file type you want, some pics online will only let you download them as they appear online though. If they are posted as bmp files you may only be able to download them as bmp files.