I think you can use the GD engine to do this; try these commands:
ImageCreateFromJPEG(...);
ImageCopyResized(...);
ImageJPEG(...);
(full ref for those at php.net/image)
As for your specific config, it should work, but if not try http://php.weblogs.com/easywindows or www.php4win.de to download a pre-configured version, ready to rock...
...in fact, at php.net, I just found this sample code which seems to reduce a JPEG to 25% size:
<pre>
$src_img = imagecreatefromjpeg($imagefile);
$new_w = imagesx($src_img)/4;
$new_h = imagesy($src_img)/4;
$dst_img = imagecreate($new_w,$new_h);
imagecopyresized($dst_img,$src_img,0,0,0,0,$new_w,$new_h,imagesx($src_img),imagesy($src_img));
imagejpeg($dst_img, "scratch/$imagefile");
echo "<img src=scratch/$imagefile>\n";
</pre>
good luck,
Eric Mueller
http://www.themepark.com/php/