I've modified sponsors-slideshow-widget.php to resize images while keeping them proportional to the original dimensions. Replace lines 155-153 with
list($width, $height) = getimagesize($link->link_image);
$xscale = $instance['width']/$width;
$yscale = $instance['height']/$height;
if (($xscale > 1) && ($yscale > 1)) {
$new_width = $width;
$new_height = $height;
} else if ($xscale > $yscale) {
$new_width = round($width * $yscale);
$new_height = round($height * $yscale);
} else {
$new_width = round($width * $xscale);
$new_height = round($height * $xscale);
}
echo '<img src="'.$link->link_image.'" alt="'.$link->link_name.'" height="'.$new_height.'" width="'.$new_width.'" />';
} else {
echo $link->link_name;
}
http://wordpress.org/extend/plugins/sponsors-slideshow-widget/