According to the SW help bitmap sketch pictures (tiff, jpg, etc) can be up to 4096x4096 pixels and if they are bigger they are halved in size until they are below the limit.
I found that this is not true. The actual limit appears to be 1024x1024 instead. Above that it gets halved. E.g. a 1026x1026 image becomes 513x513.
Not sure if this is a bug or a "feature", but very frustrating nonetheless - it took me an hour to figure out what "I" was doing wrong....
I also did not find it anywhere on the web, hence this message.