Yes, the image to be "engraved" you replace with your own. However, there are additional 15 images that are necessary to create the effect... (1 for each of 15 steps between white and black) and those need to be included in the resources. Now it is possible to replace those as well, but this is a lot of work that I would not want to do again if I could avoid it :-)
Your idea with jpg compression is a good one -- I might try this and see if the package will fit on Share...
In any case, for now, I am making the package available on my website for anyone who wants to use it. Here is the link:
http://bodytko.com/engrave/