I've posted about this before and doing a search of the forum reveals other people having this problem, but nobody has any solutions.
When using the thumbnailer to create a thumbnail, the image it creates is of the bitmap format. Because bitmaps are uncompressed, the resulting thumbnails while smaller in dimensions are often larger in file size.
At first I thought this problem was simply due to a particular image I was using, but so far every JPEG that I've thumbnailed using RadEditor ends up as a bitmap file. Adding to the confusion, the thumbnail is saved to the document library with a .jpg extension, but the actual file format used is bitmap. This can be seen by right clicking the image in Firefox and selecting properties, which reveals the "Type" of the image to be "BMP image". I also saved the image to my desktop and opened it with Notepad++ and confirmed the file signature (BMP files begin with the letters "BM").
Upon further testing, the same problem happens to PNG files and also GIFs. They are saved as BMP files but the original extension is maintained.
Here are some links to the original files and then thumbnails created using RadEditor:
Original JPEG: http://gfsmesh.com/store/images/j0437274.jpg
Thumbnail (which is a BMP): http://gfsmesh.com/store/images/j0437274Medium.jpg
Original 32 bit PNG (has alpha transparency): http://gfsmesh.com/store/images/homepage-callout-frame.png
Thumbnail (is a BMP, note the black where transparency was): http://gfsmesh.com/store/images/homepage-callout-frameThumbnail.png
As for the server configuration:
Windows SharePoint Services running across 2 web front ends and 1 database server. The servers have all of the .NET frameworks through 3.5 installed and are up to date with the latest patches. The SharePoint installation has a variety of customizations, but they're mostly visual. Nothing I can think of that would have anything to do with code at the level RadEditor runs. The currently installed version of RadEditor for MOSS is 4.5.4.
If there is any other information I can provide to help solve this problem, please let me know.