Ah I found a working version of the program but I'm not sure how to repaste in my edits. I figured out a method that could be used to some degree based on the rules that obese stated with increasing resolution. Basically all of the pictures have a static resolution. And once the pictures were placed in the game, it seems that some sort of graphical in the PSX redoing changes how the picture looks, and starts to make it grainy. You see this a lot in stuff like windows 95 games when u at tab, etc. So using the original grainy picture, I tried to start "smoothing out" the grains on parts that could be considered solid colors and hopefully produce a more pleasing looking result when stretched in the game. I'll try to post up some pictures of this soon. There's only 2 problems with it so far.
A) I don't know how to repost it in the game to see my actual result.
B) As being done by hand it is reallllly tedious.
After I show you guys pictures of the method I"m using and the before -> after maybe a better method of doing it can come about? I'll try to keep this area updated. Laters!