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Ebook Architects has found that the automatic resizing in the Mobi creation software can cause degradation in picture quality on the DX. Check the blog post here for details:

Picture 1.png… That leads me to my current frustration and to a very large problem with the current publication process at Amazon. The default format for books on all three Kindles is the Mobipocket eBook format. When you upload a Word document, PDF, or HTML file to the Digital Text Platform (DTP), the system runs Mobigen (the command-line version of Mobipocket Creator) on the file and generates a PRC/MOBI/AZW file that can be read on the Kindle. The same process is activated when you send a file to your Kindle using its e-mail address. Because the DTP will automatically create a Mobipocket file based on the file you upload, it is always best to create and upload a Mobipocket file yourself. In addition to giving you better control over and knowledge of the book’s formatting, uploading a Mobi file gives you the ability to add a cover image that automatically zooms on the K2 and DX, and it gives you the ability to create waypoints in the Location Bar on those devices, making navigation between chapters as easy as a right- or left-click on the joystick. I cover the details of creating a Mobipocket file with these additional features in Chapter 7 of my book.

However, Mobipocket Creator and Mobigen both reduce the size (and, by necessity, the quality) of images when embedding them in a Mobipocket file. That function was apparently included in the days when Mobipocket books were being read on small Palm-like devices that could not handle large, high-quality images or large file sizes. Images that are the proper dimensions for the Kindle DX screen are automatically re-sized whenever you generate a Mobipocket file. This function cannot be overridden, and is not related to the compression option you can set in the two programs

 
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