You have to first start with a decent image, the larger the better. I'm a bit anal about how mine look so when I add books, I go back through them and check each cover out and hunt down better originals. As strictly book covers I'll resize them to a height of 500 pixels. If I'm going to use it as a screen on my Sony reader, I'll resize it to 600x800, convert to greyscale, and punch up the contrast and sharpness.
When you reduce the size, you will generally get better images if you then use the Sharpen tool that's in your graphic program of choice. Also, don't save files with a high compression. You can keep very sharp looking jpg images if you use something like 5% compression. Check how your program is savings images, at what compression.
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