Confusion over best image size

I'm trying to get my product images optimized. Previously when I was using the eBay interface I understood that 1600px X 1600px gave me great images.

I'm using the the Smart Handhelds template with Slideshow option. When I try to upload image I see the Max-Image size is 1920px X 1440px, so I make an image that size and upload. When it has uploaded into the Select Image panel it has now downsized to 1280px X 960px. And further, when I preview the listing the images are then stretched backup to 1390px X 1040px.

This is obviously lowering the quality of my product images. So my question is, what image options should I be using to get the maximum quality without this compression and stretching. Ideally I would like to just use 1600px square as that is best for eBay gallery.

Thanks for any help. 

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