PhotoPlog currently uses the GD library. There isn't an on-the-fly option to shrink to a max of 512KB spot on. There is a quality parameter that you can pass, zero to 100, but that won't guarantee a specific maximum file size. Not sure it'd be worth process time to shrink repeatedly until the filesize is at most a certain limit though.
However, if you allow 2MB files for upload, and you have enough memory, PhotoPlog will use the filesize of the original upload when calculating upload limits. Dimensions don't really matter as long as the filesize is under the value set in the permissions. PhotoPlog also keeps the originals around to, for example, rebuild thumbnails.
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