The JPG format is a lossy compression format, so saving icons in this format causes some compression artifacts, even at best quality. I notice that the App icon is stored as a PNG anyway, so I just wonder if the feature could be added to upload icons in PNG format. (I assume the cropping feature works only with JPG and that's why JPGs are required?). Also, my icon was 57x57 (as required) but I still had to crop it. If I didn't attempt to crop it (and had to click in the picture and move the cropping area around--even though, technically it didn't move) I got an error that I needed to crop the image first before submitting it (or saving it, I can't remember the exact wording). My solution was to go into the source files and swap out a good icon for the one that was there.

Welcome from Charlotte and good points indeed. There are some techie-nerd reasons for JPG only in the control panel. Like you realized after downloading the project, the JPG is converted to a PNG when the project is downloaded. Like you, lots of folks are replacing this icon in the iOS or Eclipse project after downloading the source, this is a good approach ;-) We may or may not support PNG uploads in the future? Seems logical that we would.