WTF are you saving to j-peg format for? Thats a lossy format that will degrade the image quality when you save to the format. Save to .png or .gif (since the files must be 256 colours) which are none-lossy for your source images before a save to pcx if you must have an intermediate. Its better to go straight to pcx of course though. If you can't use the suggested formats, use bmp instead. Make sure as suggested you don't have shadow combine selected and if you are making infantry or buildings, you need to use shadowsplit the first time you convert to .shp.
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