There is no reason to downsize your photos before importing them into iMovie, you're just reducing the image quality unnecessarily.
By default, the iLife apps scale photos to fit the frame. Look at the "Photo Settings" palette that appears for a selected photo when you have the "Media" button selected. Make sure the "Ken Burns" checkbox is not checked. The top slider adjusts the photo size within the frame; make sure it is slid all the way to the left (the box to the right of the slider should read "1.00") and your photo should be all within the frame. If you adjust the slider before you import your photos, all the photos you import should conform to those settings.
Most photos are not exactly the same size as the video frame so there may be narrow black bars on either side of the picture. If you don't want those to appear, you will either have to slightly increase the size of the photo using the above mentioned slider, which means cropping them slightly top and bottom, or you can adjust the aspect ratio in PE, but be aware that distorts the image a bit, making everything look stretched out side to side. If that doesn't bother you, that's fine.
Also, I suggest adding your photo captions as titles in iMovie, if you can find a style that suits you. I've found that when processing titles and transitions iMovie preserves better resolution in still photos.
MacBook Pro, 2.66 Ghz Intel Core i7, 4GB RAM, 500 GB HD, OSX 10.6.8