1. Download this program. It's both free and handy, and I highly recommend all Mac users own it.
2. When you're ready to save your icon, go to file > save as and change the format to PNG. Save it under whatever name you wish.
3. Open Resize 'em All and drag your .png into the program. Click the box that says "Save As..." and change the format to JPG. Save it under whatever name you wish.
4. Voila. You now have a .jpg in a usable LiveJournal size without the loss of quality that Photoshop causes.
For comparison's sake, I threw together a quick icon to demonstrate the difference. This is what I got when I used this method to create a JPG of my icon: and this is what I got when I used file > save for web in Photoshop: .
Big difference, right?
Hope this helps someone! :)