Amy.....Yes, your original image will have to be quit large, as my IH Max image size is set to is 500x500, but, my images are all 600x600.

But, my settings in Admin>configuration>images are as follows:

small image width: 200
small image height: 200

Product info-image width: 400
Product info-image height: 400

image-Product listing width: 200
image-Product listing height: 200

image-New Products width: 200
image-New Products height: 200

IH large image maximum width: 500
IH large image maximum height: 500

These 5 settings should give you the same results as my site.
Then for each product, upload 1 500x500 or 600x600 image (placed ONLY in IH default image placeholder), and IH will do the rest.