I thought of this yesterday, but I fugured I wouldn't ask because I was sure it may have been asked many times. I didn't read all the posts, but, what's wrong with simply saving a high resolution charatcter in ms paint? I have a psp, and BMP files load up fine, don't know about an iPod, but is there some reason this cannot be done?
The PSP allows you to zoom into 200% of the image's native size. All that would need to be done is make a folder with all the bmp, jpg, ect. files.