Some questions/problems:
1) My jpg figure is still converted. Is this because inside lyx I have specified output scale to 20%?
no, this is passed to TeX
2) Run l2h from inside LyX:
(by specifying latex->html coverter in prefs)
The command is: latex2html -debug -no_subdir -split 2 -show_section_numbers -image_type jpg test4.tex
In this case I get a reduced color (256) jpg image, I'd rather have it in the orginal color if possible (let say at a color depth of 24).
I suppose that LyX runs latex instead of pdflatex and then latex2html takes the converted jpg-eps and converts it again to jpg.
Try to run _first_ pdflatex from inside LyX and then latex2html.
Herbert