Wow, IE really mangles that image up (without bicubic interpolation, that is)! It would help if the sample image didn't suffer from JPEG compression artifacts. I wonder why this isn't the default? Performance, apparently?
Yeah it really makes a difference, when applied. I'm thinking the IE team was just lazy and didn't implement the resizing method, much like they didn't implement transparent PNG files for a long time. I'm not sure why it ended up in CSS though.