Found what i was looking for. Optimizing image size can be done by ScaleTransform. Here's where i found the solution: http://www.wintellect.com/CS/blogs/jprosise/archive/2009/12/17/silverlight-s-big-image-problem-and-what-you-can-do-about-it.aspx
Although the blog post is for some website the blogger is creating, he talks about Silverlight's problem in this post, and hence applicable here.