I don't have an immediate answer for you here, but I'll try to get this fixed today.
I think I fixed it. I took off the gallery preview and welcome stuff off in the news admin section. Set to Standard:News Only. The images went back to normal size. This works for me.I don't want the extra stuff on top of my news anywys.
I moved the gallery preview to a box on the side menu. Which btw was a nice implementation
Though to get it to work oddly enough I had to type something in the HTML Body box on the Edit Custom Menu page. When I remove the entry the gallery preview stops working.
I thought I'd mention this here since it might be causing problems for others.
Thanks again for your help