Scaling up images is definitely not a good idea - you further lose quality and the result looks horribly pixelated and unclean. You have a repeating background as well, not good for larger resolutions.. Among other issues.
May I recommend that you read through Netty\'s website criticism thread? It has a lot of good pointers about what really needs improving. Moreover, I think further study in web design in general would be helpful :)
Not trying to purposefully put you down - I hope you don\'t get any such vibes from my post - but if the site is going to be redesigned, it has to be redesigned rather well...