@redblack
Personally, I have the best results with 128x128 jpg at quality set to 75%.
Some of IMVU's original developer tutorials (2003 - 2006), say stuff like:
• .jpg is the file type of choice. There are a plethora of file types that we support but we have found .jpg to be both the best tasting and most filling.
Different areas of the avatar stretch the texture differently, some parts stretch a lot and it's common to find that a nice texture will become blurred. Some meshes are worse than others. For more detail, you need to derive from products that have templates for several areas that you want to have more detailed. The highest resolution that the client reads are templates 256x512 px or 512x256 px (anything higher such as 512x512 gets forcibly re-sized down under the hood). Try finding a mesh where the mesher states they have remapped the basic template to where the individual parts are broken up into separate maps.
As far as I can tell, the code base for IMVU's 3D engine was made with low resolution jpg's in mind, so it's algorithms for stretching jpg's work best, better than png, better than gif, better than tga.
In summary, I try to find meshes that support lots of broken up textures mapped over small bits (example: a separate texture for each limb, and a few textures on the torso), and then I stick with decently sized (128 by 128 or higher) jpg's. Bad meshes are the biggest culprit of blurry images. If the mesh does not have good texture mapping (strategically broken up into small parts), then you will end up with blurry textures in client.