It will also show up if you link the original from another site, like Flickr, which is what I use.
I sort of like the idea that Challenge photos have some consistency to them. I think if we were to require a specific size (1000 on the long end) that would allow more of an apples to apples comparison that may get lose between larger and smaller photos. Also, while I'm not a huge fan of posting without a watermark, if we can preserve the EXIF data I'm thinking that allowing the challenge photos to be somewhat anonymous at viewing time (yes, our names are on the post) goes a little further towards apples to apples - but I completely understand anyone's lack of willingness to go that far.