Here is a side by side comparison of the various .jpg size/compression settings.  I used a Nikon D3S with a Nikon 70-200 f2.8 lens for these pictures.

 

 

This is the original picture

.JPG compression settings are along the left side.  Picture size is along the top.

	Large	Medium	Small
Fine
Normal
Basic

As you can see, compression does not effect image quality as much as size does.  Yes, size does matter.