1) install plugin
2) enable it and edit settings if required
3) Insert images to your content in a regular way. It can be a big photo of 3Mb and more it doesn't matter. After that change image size in a regular way.
Thumbnail of chosen size is automatically generated, popup window on clicking the image is automatically genereated as well. Both are optimized.
Tested on Joomla 1.7.3
Thank you for sharing such an amazing plugin.