Hi Frank,
Starting at version 3.30b808511, when adding an image element, then selecting an image, KLWP will scale the image down to a very low resolution.
I noticed that in the older versions (older than 3.30b808511) when adding an image element and viewing in the item list, underneath the word "Image" it said "Not Set".
Now in the later versions, it says "75 x 75". So it seems to be immediately scaling the selected image down to 75 x 75 px.
Thanks
-josh