Use Photoshop or Photoshop Elements to scale the pictures before you import into PreElements
Photo Scaling for Video http://forums.adobe.com/thread/450798
Also, do be aware that photo dpi (dots per inch) does NOT translate to video... I don't have the exact number handy, but I think a DVD resolution video is "about" 72 dpi (BluRay is higher, but since I don't do BluRay I have not even a guess at picture resolution)
Have you rendered your timeline (press Enter) before you previewed your video?
Have you right-clicked on each picture and selected Field Options/Flicker Removal?
I went back and used Photoshop Elements to resize all the still photos so that the photo size did not exceed the maximum of 720 wide by 480 high, which is the frame size of the video. This improved the clarity of the stills in Premiere Elements (PE). They are not as clear in PE as the originals. I burned a DVD of the video and the still pictures look better playing from the DVD onto my Samsung UNA46C6400RF TV. The base video is from 1991 and standard definition and the edited video with the stills and even older video (1946) looks pretty good when rendered onto a DVD. Thanks for all you help.