You know, you don't need to quote the entire post; just the relevant info is fine.
It wasn't supposed to be pixelated...
Art done in Paint (or using brushes with 100% hardness and opacity) = "pixelated"
Basically, anything with 256 colors or less should NEVER be saved as a JPEG or it'll be seriously warped. At LEAST save it as a GIF if you're not going to save it as a PNG. As a general rule of thumb, only save photographs (including edits/manips) and scans as JPEGs. Anything else go PNG.
(I save everything as PNG unless it has layers I want to preserve; images with tens of thousands of colors I tend to make a JPEG
copy for intarweb space-saving purposes.) Lossiness = evil. D: