Creating thumbnails for Image Large Blob data and storing thumb in mySQL database

I have a database that has farily large images stored as large blobs in the database.

The code that stores the image after it is submitted via POST is like this:

if ($_REQUEST['completed'] == 1) {
        // Need to add - check for large upload. Otherwise the code
        // will just duplicate old file ;-)
        // ALSO - note that latest.img must be public write and in a
        // live appliaction should be in another (safe!) directory.
        move_uploaded_file($_FILES['cellframeimageData']['tmp_name'],'latest.img');
        $instr = fopen("latest.img","rb");
        $image = addslashes(fread($instr,filesize("latest.img")));
            $imageSize = strlen($image);
        if (strlen($image) < 5000000) {
                mysql_query("UPDATE images SET cellframeimageData ='".$image."' WHERE cellId ='".$_REQUEST['cellId']."' AND cellframeOrder ='".$_REQUEST['cellframeOrder']."'",getdbHandle());
        } else {
                $errmsg = "Too large!";
        }

For displaying images I am currently using something like this:

<img src='imageGetter.php?cellId=1&cellframeOrder=0' width=200

where the target page grabs the blob data from the database and spits it back.  The base code for that is like this:

$query_image="select cellframeimageData from images where cellId = '".getUrlStringValue('cellId',null)."' and cellframeOrder = '".getUrlStringValue('cellframeOrder',null)."'";
$res=mysql_query($query_image,getdbHandle());
$row = mysql_fetch_assoc($res);
extract($row);
if (isset($cellframeimageData)) {
header("Content-type: image/jpeg");
echo $cellframeimageData;
}

All of that is working as far as storing the images in the database and also for displaying them, although I do have a couple of questions.

1.  It would be nice if it were possible to bypass the call to the imageGetter.php page and somehow diplay the image inline by directly pulling it from the database rather than having it reference the external page.  I guess there isn't a convenient way to do this as you would have to somehow embed the image source in the page rather than in a external file on the server of via the on-the-fly method using the external php page?

2.  I also want to be able to create some thumbnail images from the larger blob images above and store them in the database as well.  Again, if it were possible to pull and display the thumbs from the database without having to use the external php page that would be nice.

3.  I noticed that there is alot of discussion about the merits of storing images or large files in a database rather than in files on the server.  I am kind of playing with that to see how the performance is and to see what I would prefer, although I like the idea of having a self-contained file that stores the whole set of data rather than having the images on the server, but I guess you can take a pretty big performance hit if the db gets large.  In my app, I would probably display the thumbs most of the time and only retrieve the larger images as requested.  I was hoping that that would perform fairly well for small images.