Resizing by pixel and placing in Illustrator

Hello: Complete newbie here, please have mercy.
I am resizing a very large jpg image from 1544x1024 px to 170x113px using PS CS3.  When I then place the image in Illustrator the image only fills 40x17px.  I have tried saving the image as a jpg & psd file and the same thing happens. Can someone tell me what I'm doing wrong?
Thanks!

Nothing is wrong, click on Transform in the Control Panel (what we call the Options Bar around here) and change the size from there

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