All of the talk of connection speeds and dial-up vs broadband is getting a bit far afield from where I was hoping to go.
The real point here is in the comparison between the two images.
If you can retain the quality of a 700k file for web display, but do it in 200k, why use the 700k version? Broadband or dialup, smaller file sizes are clearly better so long as quality and image size are not compromised. It's the best of both worlds. Even with a good high-speed connection you can see the difference in load times.
Scott