The older version of the SMC had a ‘user-controllable’ and optional crop feature for pictures. This has been dropped in the newer version. There have been others who have said that it apparently still ‘crops’ the picture according to parameters only known to the software.
The truth is you can re-size your pictures yourself in their entirety. The SMC also converts them to a .bmp format, but the Sansas support .jpgs (as evidenced by the display of album art) as well. The conversion to .bmp probably also reduces the file size, and therefore the quality of of picture as well. If you use Photoshop, Paint Shop or any other image-editing software, you should be able to re-size your .jpgs down to a manageable size of 300 x 300 or less, and simply drag & drop them to your device.
When all is said & done, you still have to realize that viewing pictures or photos on a 2" screen is not going to look the same as when they are the original size. More of a thumbnail view in comparison.