If ur gonna use the VDub method, be sure to click on Windows BMP as the Output Format. Also, "Save image sequence" is located under File. When MJ means isolating, you should use the Mark In and Outs (the little black arrows) to specify which frames you wanna save. And of course, one frame (one click on the Marks) equals one image.
You can then use an image editing program like Photoshop to resize (although this can be done in VDub, using the resize filter and Lanzcos3) and optimize your image to a smaller filesize/different image format.