Well, even when I resize it in photoshop it still makes it look bad. I was wanting to know if I need to make a vector or something out of it first. (but I don't know how if that is what I need to do)
I don't know how to do this in photoshop, but here's what I did in Paint Shop Pro. I blurred the picture first, then reduced it. You can see that this makes the picture look a lot better when reduced.