Moonpi, it's Auntluc that stores hers in her camera. I store my recent ones in my Pictures folder then back them up to the external HD to keep the computer uncluttered.
Auntluc, let me do some research on XP and changing the jpeg sizes in your pictures. I will PM you with what I find. I know there's a way but it doesn't come to mind right away since I've used Vista for a while now. I'm on XP at work and will play with it to find an answer for you today.