Web site relativity

it would really slow the website down.

exactly how depends on the server os, and tools installed on it.

a typical linux server will have the gd lib and php will work with it to manipulate the images to the size you specify in the script.
you just need o get the client screen resolution to know what size to go for.
that is the problem part, not all browsers will report client settings reliably, which screws the scaling.

From a design standpoint, you should plan for 800x600, the lowest common denominator, IF your target audience is likely to be using that resolution or a multiple of it. Even larger monitors set at 1280x1024 will scale properly. (On a personal note, I figure the wide screen people are on their own as far as web design. They bought the thing, they can deal with the empty space! ;) )

As for images being scaled, it doesn't necessarily work that way. Some browsers, such as IE, will auto-resize images to fit the screen IF that option is turned on. Not all browsers do that. So, you need to use graphic sizes that are going to fit into your design at the lowest common denominator resolution you plan for. In addition, larger sized graphics CAN mean larger file sizes, so you have to take total download time into account too when designing your pages.

And, of course, there are tricks you can use to fool people into thinking they're looking at an image that scales but they're really looking at CSS and pieces of images. :D

When all is said and done, your page should look good no matter what screen is used to view it, so LOTS and LOTS of testing is in order before you release it.

By using tables and using percentages for your sizes.

So if you wanted too, say insure your banner was always accross the full width of the screen

< img src="image.jpg" width="100%" />

Would be an example. Width and Height properties work for almost all HTML tags. You can also use styles (CSS) to do the exact same thing to any element. CSS is actually the recommended way, but image stretching and such never really looks good, so I suggest you make something simple to try it out first.