After recently seeing a post on this forum saying that you can use jpegs for custom graffiti in Jet Set Radio I decided to upload some SEGA themed images to my website for use in JSR (I might upload them to the JSR website at some point as well). I've compressed them so that most small graffitti images only take up 10 blocks or 20 blocks for extra large graffitti (and somewhere inbetween for large ones).
They are available at http://louistheseganerd.atwebpages.com/downloads.html and can be downloaded using JSR's built in browser by pressing X+A simultaneously after clicking on an image.
P.S. If anyone wants a specific image adding please let me know and I'll try and add it to my website...