You might want to play with the PPM format, it is really easy to work with all the data is stored in ASCII text or similar. Then you can look into using a compression algorithm.
http://en.wikipedia.org/wiki/Netpbm_format
When I was working on an embedded system image processing project, I used the CIMG library, it is really easy to use, and allows you easily display the images in a gui with a lot of feed back with about 10 lines of code. If you want some sample code from my project, ask.
http://cimg.sourceforge.net/