Feret,
The "Save As" feature is only a "copy to local drive" action. This cannot change file format so maybe you are actually downloading bitmaps (especially if you need to use Picture It to change to a JPG). As a test, use windows explorer to rename the file to a .jpg extension (you may need to enable file extension viewing in the windows explorer options), then open the file and if you get an error, you know it was a bitmap file originally, so no need to fret.
Regarding the USB install hangs, try installing the drivers and software PRIOR to connecting the device to your machine. You would be surprised just how many devices have this problem. Think yourself lucky, if you were running windows 98, that crash could have been a full o/s meltdown.
Hope this helps.