Hi George.
I'm replying in the hope of providing some background that will help you understand and thus be able to resolve your issue yourself.
"Photo" has no fixed meaning in the world of computing, and shouldn't be used.
What you had was a printed image. The print was "2.5 ins x 3.5 ins". Physical dimensions do not match _information density_, which is what is important with _digitized images_. Information density is measured in pixels.
You scanned your print and ended up with a _file_. All files have a format. Common formats for image files are JPG, TIFF, GIF. Yours is a JPG. (JPG and JPEG can be considered identical.)
Files have no physical dimensions. The height and width of the image are measured in information units called pixels. Your file has pixel dimensions of 2480 × 3508.
A useful (because it is accurate) rule-of-thumb is that you need 300 pixels for each inch of printed are in order to print sharp images, and that 150 pixels for each inch of printed area can sometimes suffice. This measurement is usually abbreviated PPI (pixels per inch). Using this rule-of-thumb, you can determine that you can make a sharp print of your file easily as big as (2480 pixels / 300 PPI = ) 8" x (3508 pixels / 300 PPI = ) close to 11". Using the same rule-of-thumb, we can double those dimension and conclude that printing at 150 PPI you might be able to still get a sharp print at something close to 16" x 22".
The rule-of-thumb assumes that each pixel holds "good" data. If the print you scanned is low quality, or your scan is low quality, you will get low-quality results at all PPI's.
I don't use iPhoto. Perhaps someone who does can. I suggest posting questions about printing from iPhoto in the iPhoto forum.
HTH,
—Kirby.