Forget .paa, as far as I can tell its a waste of time, energy, effort and disc space - use .jpg.
The picture that you save in your picture editor (eg Microsoft photo editor) has to have sides a factor of 2 in pixels, as you know. However it can be any size, so 64x32 or 16x256 or whatever you like.
The actual size that the picture appears in the Overview is determined by the size you define there, not the size you saved it. The standard size for BIS missions is (I think) 170x64. Check the Tutorial Mission in the Ed Depot, its designed for you to copy.
So this is what you do. In your picture editor create a picture that is the size you actually want, say 170x64. Now distort it and save it as 128x64. In your Overview file define the size as 170x64 and bingo.
In other words the code for that size of picture is
<p align="center"><img src="shopping.jpg" width="170" height="64"></p>