and i had the same problem
i presume you are using IE (internet explorer)
well my sugestion is you download netscape/mozila this doesn't have the same issue.
i am only temporarily using IE untill i can be bothered installing Netscape or mozila.
see ya round bro
p.s. the other way to change this is to simple write *.jpeg or *.jpg at the end and it will save it as one of them
actally on checking this the file size for all of these is the same so it can't be doing it right so just download one of the other browsers to overcome your problem
It gives me the option to save as .gif as well, however no .jpg. If you open with any program or even windows picture viewer you can resave as .jpg and drop the size down then just delete the .bmp (that's what I do anyway).
The reason is often that the IE can not handle saving when it has to many temp-files.
Go to the Tools menu -> Internet Options and chose Delete files from the "Temporary Internet files" section.