Image Sizing and Post Truncaction

When I add an image to a post, I see there is a selection for image source and image size. What are the differences between these two options?

I have a menu item for showing a Post Frontpage. I noticed that the posts are removing the formating. I have the truncation turned on, but some of the words do not have spaces because in the original post there is a return after the word.

I have included the link in the site details. If you look at the second post, you will see how the address is missing spaces. I have been playing around with the truncation length to fix the problem, but I am not sure if this is the intended output of the post on this page.