updated as mentioned in http://stackoverflow.com/questions/8711253/how-to-resize-the-categories-images-in-magento/13734991?noredirect=1#comment21612869_13734991

Updated as suggested by netismine - http://stackoverflow.com/questions/8711253/how-to-resize-the-categories-images-in-magento/13734991?noredirect=1#comment21612869_13734991