Lee, I'm using Photoshop 5.0 and I have Windowes XP, I can follow the instructions all the way to compression, which I can only view when I try to save. Even after I put it on low it doesn't shrink the file size (nor do I get the side by side comparison).
The only workaround I've been able to come up with is, using XP, right click on a picture, select send email, open the attachment, copy it back to my photo folder. It works but I'm sure it's not the optimum solution.