I thought rescaling in quicktime and then saving would cause it to re-encode thereby causing a generational loss is that correct?
No, the encoded file is duplicated exactly as it was. The only thing that is changed is the new display setting. Same is true for setting auto-start, loop, quality, cache hint, preload, volume, balance, treble, bass, etc. flags which are applied at the time of display. Since the file size, data rates, etc. are not changed, you would not want to simply re-scale a 720x304 conversion file. Instead, the strategy here is to create your iPod compatible file and then simply correct the distortion introduced by by the converter's "approximation" of the aspect ratio.
I want to see the original intention of the artist. I mean relatively, the difference between 136 and 142 and 136 and 128 is quite significant it's about 5% difference which is noticable to me.
Could live with incremental steps of 4 but consider 16 to be too coarse even for my own greater sense of tolerance in this area. I believe that if it bothers you, then you should change it. If it doesn't, then don't bother. As far as changing it, am merely trying to find a path of least resistance which balances efficiency in terms of time, space, and complexity.