Does the escher.raw file have to stay at 60kb?

I don't know if the file size is an issue, I think it's more likely to be the X and Y dimensions of the image. What I would do is to copy the image from RAWerter to the clipboard and paste that image into your paint program. Then, look at its dimensions (I think it was 480x471 or something) and create a new image of the same dimensions or paste your image into the old one before copying and pasting it into RAWerter.

Remember that the "logo.raw" file must be plain, but the "escher.raw" file must be RLE-compressed, so choose the appropriate options when saving the file.

What imaging software are people using to make their files?

I'm using Paint Shop Pro. I have a palette file which allows me to apply the "empeg gray shades pallete" to the image. (I created this palette by pasting an image from my logo editor into PaintShop Pro, reducing it to 4 colors, and saving off that palette.) This allows me to get the image looking exactly right before pasting it back into RAWerter.

Who's Geddy Lee? Is that a UK thing?

Canada thing, actually. Geddy Lee is the vocalist and bass guitarist for the band Rush.