Photo format

It would depend on what format was used at image capture.
If you're using a scanner then use TIFF as it doesn't "compress" as much as JPEG. Make sure to set the DPI to at least 300 when scanning and set the dimensions to the needed size before bringing them into iPhoto.

If scanning be sure to use the sRGB color profile, even for black and white images. iPhoto doesn't play well with grayscale image files.

Do you Twango?

TIP: For insurance against the iPhoto database corruption that many users have experienced I recommend making a backup copy of the Library6.iPhoto database file and keep it current. If problems crop up where iPhoto suddenly can't see any photos or thinks there are no photos in the library, replacing the working Library6.iPhoto file with the backup will often get the library back. By keeping it current I mean backup after each import and/or any serious editing or work on books, slideshows, calendars, cards, etc. That insures that if a problem pops up and you do need to replace the database file, you'll retain all those efforts. It doesn't take long to make the backup and it's good insurance.
I've created an Automator workflow application (requires Tiger), iPhoto dB File Backup, that will copy the selected Library6.iPhoto file from your iPhoto Library folder to the Pictures folder, replacing any previous version of it. It's compatible with iPhoto 08 libraries. iPhoto does not have to be closed to run the application, just idle. You can download it at Toad's Cellar. Be sure to read the Read Me pdf file.