I cant see any settings and cant see much in the php api docs regarding this?
for instance if the original file upload is a
png wordpress converts to
The thumbnails will be saved using the mime type of the file.
You will need to create your own functions using a php extension or or library. WordPress uses GD but hopefully this will be ported over to ImageMagick by 3.5 Using the API available in the extension you can add hooks and filters to convert the images. A good starting place would be o look ate the media_handle_download and media_sideload_image functions.
Here's something I wrote because my clients were using very high quality pngs, when they could be more lossy jpgs for web. Note this still preserves the original image, only changes the thumbnails. Add this to your functions.php