Hi weegav43,
Before moving on, I would like to confirm the following things:
1. Do you mean your public website has been transferred from Office Live to Office 365?
2. Which Office 365 Plan are you using now?
Regarding upload picture issue, Please upload the images into the Website Image Library and then use the Insert option to see if any improvement.
For your reference:
Add and customize images on your website
Thanks,
Johnny Zhang