The high resolution means the image will be scaled down for the pdf form instead of up. Scaling formulas do a lot better job throwing away extra detail than they do creating detail where it doesn't exist.

The large color depth gives the formula a much better ability to anti- alias. If you are using a black and white (1 bit) color depth, it can't anti-alias at all and will always create a jagged border. If you are using straight black and white, just converting the image to a gray scale image will make a big difference in the result of scaling.

As for image processing software, you can use Adobe Photoshop. But almost any tool will allow you to alter the image color depth and save under a number of formats. If you have linux, it comes with a tool called "gimp" that is an open source knockoff of photoshop without the fancy user interface.

Is .JPG the 'best' file type? Or is there a better one? And for that matter, what other formats are acceptable (if any)?

For screens, you can use JPG, GIF, and PNG files. JPG's aren't good for line drawing (because the images are compressed with a lossy algorithm - sharp lines disappear).

GIF's are patent-encumbered.

If you want to include a resource image that has fine, crisp, details, you don't want to use JPG to store the image. JPG uses pixel averaging which distorts and drops out fine detail. Like very thin lines and such. JPG was create to store high color, low detail images like photographs.

PNG is the best bet. It's the newest if the three and does a fine job.