@dustinjw, @streetlove, @gosouthonline,
Then maybe the issue is with Photon. As stated in this thread and others the Smush.it plugin simple calls the Yahoo! Smush.it API to have the Smush.it service strip out unneeded meta data from the physical image. This in effect reduced the physical size of the image so it does not take up as mush space on your hosting server. Quite simply the original image is replace with the exact same name as the reduced size image.
Also, as stated the Smush.it plugin does not in any way update the HTML image within any of your post content. As stated in one of the replies to @dustinjw, the HTML markup in the post content contains the width and height attribute which in effect control the size of the image shown. See below for the same example
<img class="size-thumbnail wp-image-1153 alignright" width="1847" height="1764" src="http://i0.wp.com/slickandtwistedtrails.com/wp-content/uploads/2013/06/swiss-army.jpg?resize=0%2C0" alt="swiss army">
@gosouthonline, On the URL you provided I see the very tall image. Again like the above if you check the post content you will see the height is set as "2484" and the width is set as "1771" (see below for actual markup). Again the Smush.it plugin does not know how to update post content HTML images.
<img class="size-medium wp-image-67165" width="2484" height="1771" src="http://i2.wp.com/gosouthonline.co.za/wp-content/uploads/2013/08/Silvermine-Ramble.jpg?resize=0%2C0" alt="A group of amblers snapped next to the thick-walled Kruythuis." style="font-size: 13px;">
Furthermore as stated in other parts of this thread the Smush.it plugin will only attempt to modify images on the same physical server. Look at the image SRC "http://i2.wp.com/gosouthonline.co.za/wp-content/uploads/2013/08/Silvermine-Ramble.jpg" note that it is NOT on your server which is http://gosouthonline.co.za/
So again I suspect this is something with Photon and not the Smush.it plugin.