Jerry,
I quite agree with your friend re: jpeg compression. But I have to ask you; did you try it? There's a reason that it works out this way.
A 400x200 file at 72ppi turns into a jpeg of the same size as a 400x200ppi file at 300ppi because the uncompressed bits
are the same size. In fact they're the same in every respect except for an element that turns out to be irrelevant. Dimensions.
The best article I've come across to explain this (far better than I am, I'm afraid) comes from Bob Atkins (of photo.net fame, and is entitled Digital Image Resizing. You can read the whole article at his website
here.
Here's the key paragraph:
"When you display a digital image on a monitor using a web browser, the only thing that determines the size of the image is the width and height in pixels. All the other data contained in the image file including resolution (ppi data) is ignored. If your image is a 480Kbyte file which is 800 pixels wide by 600 pixels wide, it will display as a full screen image if you are using an 800x600 display. It doesn't matter if your ppi is set to 1 or 1000 This is 100% true as far as web display goes and as far as any monitor display goes - unless some software intervenes. For example the IE6 browser may take large images and resize them so they fit on the screen. However ppi is still ignored. A few page layout programs and image editors are optionally capable of taking ppi into account when displaying images."
I'd highly recommend Bob's article to anyone confused about image re-sizing for web display.
Scott