The way I made my album (
viewtopic.php?f=14&t=537 ) was with GIMP.
You can right-click copy an image from your browser, and crop, adjust brightnesses (including per color brightness), and convert to grayscale (gives a good idea of what the final image will look like), then scale.
To convert to 1-bit (with dithering), make sure you have an image that is already the correct size, and go through the following menus:
Image ⇒ Mode ⇒ Indexed ⇒ Use black and white (1-bit) pallette.
Then from the dropdown menu, select Floyd-Steinburg (normal) and click convert.
Done!