I'm trying to save some web interface work over a background image for my youtube page. One problem I'm having is that I can't save to png because my image ends up being over 1MB. I can't figure out how to get it under. Everytime I save it, the solid button looks muddy and pixely. PNG ends up being about 3MB so it's too big.
How big is your original, and in what extension?
The short answer is to set the pixel count appropriately, save as JPEG, and choose a quality setting that gives you the compromise you seek between size and image quality.
Is your image very large? How many pixels? What are the pixel requirements for the image you're trying to set as the background?