FWIW, dithering is using dots to simulate shades of colors. You are talking about compression.
Do you really know what you're talking about? Our current limits are 800x800, bumping it up 25% won't give much more detail. If you need more, use imageshack/flickr/etc and link it. As far as degrading picture quality, the server doesn't degrade it, it just resizes down at 75% quality.