Is there a way to set it up so that website vistors can upload and a thumbnail (w/ preset dimensions) and a scaled image (w/ preset dimensions) is created within a MT entry?

Or a way to do that so I can use it like an MT entry?

-Michael

Sure: write a program to do it.

wow thats about the most unhelpful reply ever :/

Sorry. I thought it a little more helpful than the other, equally valid response of, "No, it's not possible with stock MT," as you can in fact write a program to take public submissions to an MT site. I wrote such a script in an afternoon a few months ago, and allowing image submissions with the entries would be at most another afternoon.

Even if you can't program yourself, I'm sure there are people in the Professional Network group who would be happy to write such a program for you in a consultant capacity.