I hate working with low quality images. Compression artifacts make my eyes twitch involuntarily and working with small, blurry images hurts my pancreas. Wierd yes, but I'm sure every designer has at some point worked with client-supplied images that aren't up to spec.

Alien Skin's Blow up 2 is an awesome Photoshop plug-in that makes low quality images less of a nightmare to work with.

Let's say you were given the image below-left to work with. Very low quality, lots of compression artifacts. Run Blow Up 2 and use the 'Remove Compression Artifacts' option, and the image on the right is the result:

     Original                                          Blow Up 2 - Much better, no?

Notice the amount of compression artifact reduction in this close up:

For the next example, let's say you need only a section of the image supplied, but you need to enlarge it to fit your design or layout.

Extract the target section, use Blow Up 2 to enlarge it, play with the properties till you feel comfortable, and presto! Take a look at the difference between Photoshop Bi-Cubic enlargement and the Blow Up Enlargement... huge difference.

Check out the link:
http://www.alienskin.com/blowup/index.aspx