I have no problem at all with the "No Thanks," but now I'm confused. The quality of the two images above is indeed very clear, as you said. However, you also said that quality is expected to drop when the file size is smaller, so how come in my OP, the thumbnail, which is a smaller size than the full image, is slightly less clear, but in my example above, both the large image and the smaller image are the same quality, despite one being smaller in size?
In any case, I can see a slight difference in quality when comparing the 200 x 200 and 1300 x 867, but it's not as noticeable as the images in my OP. I think I figured it out, though: If I insert two images of different sizes as full images, there is a slight noticeable difference in quality -- particularly, sharpness -- but if you insert two images of different or the same sizes as a thumbnail and a full image, then the difference in quality is more noticeable.
I don't absolutely hate the idea of thumbnails being cropped instead of just being made smaller because it could increase the quality of thumbnails but it would be difficult to implement. The system I guess could select the middle most pixels but that's not always the most desired section. You could require manually cropping the images but that'd be a hassle especially if you never planned on using the thumbnail version.