Another option for a program simply to add frames between the images would be the GIMP. It isn't the greatest program to use, but it is free and if you get lucky you can make some interesting anmations.
You can try to save the image as a png file as well, that will boost the quality to around that of a decent jpeg file and still be able to be animated. The biggest issue with this is that anyone that is still using internet explorer 6 will have some issues with the picture and it. that, and it is larger than a gif since it is saving more information to keep it at a higher quality. I don't know how well any of the fire fox browsers work with animated png files, but they work farly decently in ie7 and I haven't seen any issues in ie8.
As for the GIMP, to animate it you need to put the in order from bottom to top with the bottom most layer as the background you want used and then put the background in behind you picture. If you don't have the same image as a background the colors can get a bit odd. Once you have your images lined up accordingly in layers, go to the filter drop-down menu and then to the animation window. I believe the option is called fade, but you should be able to recognize what it will do by name. A window will pop up that will ask for how you want to set up the intermediate frames. The higher, the more slowly and smoothe the animation will appear though for that I would start by try 18 or 24 frames. That may be a little fast though.
It will make a new file, so if it isn't right you can close it and go back to the origional file and try again. To preview it you go back to the animation menu and there is a playback choice. A window will pop up and it should be self-explanatory. When you like it just save it and it should ask if you want to make it into an animation if you choose the rght format.
I couldn't find and of the fade/blend animation files I made, but here is a simple ripple I did in under two minutes when I was testing the ripple animation:
