@acorn - furthering this discussion with a questions.

You can make a thumbnail with the process that you mentioned. But don't you have to have the correct dimensions of the photo before placing into the placeholder? Lets say you want an larger image on a mobile page. You find the dimensions of the placeholder you want - then fit a photo to those particular dimensions. Then 'replace with photo' in placeholder, and throw that saved photo into the placeholder. Of course you do not regenerate image.

If you make a thumbnail - then bring the thumbnail into the placeholder, the thumb that you made must be the correct dimensions of the placeholder. Anyway that's what I'm find after following your instructions. It certainly does save a lot of space - but I'm finding that master photo > thumbnail has to be the correct dimensions of the placeholder, especially if its a hero image. Make sense ?