I use photoshop elements to edit my product pictures. I usually save a JPGs. The problem I am encountering is that when I select a pic in the Product Detail, the thumbnail looks fine. When I preview the site and select the pic to expand I get a very small image and often distorted.

Sounds like the pic you are using is too small.

It is always better to use a larger pic instead of a thumbnail, because most of the quality stays intact when you shrink it, but not when you expand it.