I don't know what's wrong with Picasa2's JPEG export feature, but here's why I like the application but will never use it to post pictures. Evar.
On the left is a crop from an image that I exported with Picasa2's "Make a webpage..." feature. It has been contrast-enhanced to bring out the JPEG-artifact nastiness that was done when the image was written. To compare, I created a JPEG of the same portion of the image size in Photoshop, carefully matching the output JPEG to the size of the one Picasa2 created and did the same contrast enhancement. The difference between the two should be visible even to people who don't care about image quality.
Making the JPEG immorality all the more egregious is the fact you can't change the quality setting when outputting a gallery of images. Strangely, you can -- if you just want to spit out one image -- but the JPEG quality setting here too is wonky. A setting of 90% creates gross looking small images while a setting of 100% creates nice looking images with obnoxiously huge file-sizes.
I'm such a snob.