All you need to do is add the -shrink option on the read and the width and height will be set correctly. You don't even need the blank. In a quick test (under win32) it appears that memory is returned to the system when a small image is read after a large one.

use Tk;
use Tk::JPEG;
use File::Glob ':glob';

my @jpgs = bsd_glob('*.jpg');
my $index = 0;

my $mw = MainWindow->new(title => "JPEG");
my $image = $mw->Photo(-format => 'jpeg', -file => $jpgs[$index]);
my $b = $mw->Button( -image => $image )->pack();

$mw->after(1000, \&next_image);
MainLoop;

sub next_image {
    $image->read( $jpgs[$index], -shrink );
    $b->configure(-image => $image);
    $mw->configure(
        -title => sprintf "$jpgs[$index] [%dx%d]", 
            $image->width, $image->height 
    );
    $mw->after(1000, \&next_image) 
        if (++$index <= $#jpgs);
}
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