What program are you using? If it's paint that'll be the problem, it isn't capable of resizing or saving as gif without totally destroying your work...
I'd recommend using photoshop, even if you don't want to buy it you can download the trial version from adobe's site. You can probably dig up a keygen if you don't mind pirating. I included everything DexX taught me about getting images ready for SC in my paint tutorial.
The other way you might consider is to download Irfanview, which is about 3MB and free. The best way there is to resize your image first and save it as a .png file, then do the edge outline manually in paint, open up in Irfanview again and save as a gif. There's an option when saving to choose the transparent colour, just make sure everything outside the character is the same colour and choose that (fill it with bright pink or something you didn't use anywhere on the character).
Dinosaurs had eggs bro, the chicken came way later.