Im having real trouble trying to save my CW item images as .GIF files as SAI doesnt support .GIF files and GIMP makes my images all pixely :( I have no idea how to do it other than those 2 ways and id love to make them not pixely! Any help would be loved!!

I never used Gimp to save as a .gif so I don't know what possible options you could use but if you have access to a program like Photoshop, you can easily get a really good quality .gif image. There is also image editing on hosting sites like Photobucket(I think it has this) and Iaza.

Item images should be 64 pixels square with a white background and saved as .gif files. Overlay images should be 125px x 250px and saved as transparent .png files.

Are you saving the gif's with the white background? Trying to make it transparent often makes it more pixely. What about compression, are you maybe compressing it too much, or is there such an option?