Photo quality in Motion

[MsSatBT]

I have a series of Motion animations (Motion v2.1 Academic Version, set at 720x480 NTSC D1/DV) that use photos edited in PhotoShop, and saved as PNG files. A typical image is sized at 4"x10" at 300 resolution The quality at this original size in PhotoShop looks great, with very clear, edges along the 1 person in the image, against a transparent background. When I bring these people images into Motion and reduce them to about 7% of the original, they look pixilated along the edges, even at the 720x480 screen display (without zooming in). Even doubling the resolution of the source image did not help. I would expect this problem if I had enlarged the images, not made them smaller. When I tried reducing the source file in PhotoShop to the exact size I needed (at both 300 and later 1200 res) and then importing into Motion, I no longer had the pixilated edges, but the overall image looked less sharp (especially if I zoomed in). Later I discovered Motion's 3 settings for importing large files—"do nothing" and "scale down" both give the pixilation problem along the edge, and "down res" doesn't have that but looks blurry. Can anyone recommend settings for working with photos in Motion that avoids these problems, or is this a known glitch and I need a new version? It would be nice to have images with both sharp photos, and clean edges. Thanks.