I have compassion for both camps, because I live in both worlds.
On my laptop I have small (15.4in) wide screen that limits me to 1280 x 800. When I'm at my desk, I have the luxury of spreading out across two displays, the larger of which is very large indeed (30 inch 2560 x1600 Cinema HD).
The gallery is currently set to size uploaded images down to about 800 x 600. This gives pretty good detail for most users, and doesn't scroll off all edges of the screen for users with laptops and older CRT monitors.
There are few images that snuck in at a larger size before the resize function went in. I'll size those down manually when I get my hands on them.
Maybe in the future we'll be able to set the image display size as a user preference so that we can keep everyone happy.