Background image solution
I removed the image element altogether and set it as background of the div with a class of .frame
This at least works fine on Internet Explorer 8, Firefox 6 and Chrome 13.
I checked, and this solution will not work to shrink images larger than 25 pixels height. There is a property called background-size
which does set the size of the element, but it is CSS 3 which would conflict with Internet Explorer 7 requirements.
I would advice you to either redo your browser priorities and design for the best available browsers, or get some server-side code to resize the images if you'd want to use this solution.