Custom Decals

(First of all, my apologies if I've posted this in the wrong forum)

I want to do some custom decals - rally plates and number boards, to be specific. I've checked places such as Patto's and no-one seems to do the stuff I want, so I'll have to do it myself.

I started by copying JPEG images off the 'net and re-sizing them. The trouble I'm having with that is that by the time I get the images small enough, they've lost most of their definition.

So, my questions are;-
1) Are there any write-ups on DIY decals here for IT-illiterates, such as myslf?
2) If not, is someone able to tell me what format I should be working with the images in, what software I need to working with and where I can get that software?

I could attempt to design my own decals, but I'd still need software I don't have plus a heavy dose of both imagination and artistic ability - which I'm lacking in. I'd be prepared to attempt it if someone could tell me, please, what is suitable software for designing decals from scratch.

TIA
Stuart.