the information regarding the kindle display comes directly from the amazon DTP website and kindle forum administrators.
in my experience, having a computer/device resize an image to fit the viewing area results in reduced image quality, additional processing time and larger than necessary file sizes. (see any large image resized in any IE browser window) if you are going to take the time to size your images, why not size them correctly in the first place instead of forcing them to fit?
it is true that kindle resizes to a certain aspect ratio so using larger graphics will work if image quality is less of a priority than getting the book "published". not every resized image will look bad, but why chance it? (my opinion)
the 520x620 dimensions mentioned above have about the same aspect ratio of the DTP posted limitations of 450x550. the slight delay that the users notice may be the kindle resizing the image to 450x550.
i have no first-hand experience with using larger than 64kb images as grayscale images are very small to begin with and there's no reason to include extra color data that will be lost and muddied by the reader device, i think. in any case, that is the official guideline posted by amazon.
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