Yeah, the way JPEG works relies on more continuous tones (like in photos), so it's not going to work for something so pixely as the lamps.
If I was going to produce a Minecraft mapper, I think I'd create multiple images - a JPEG background that did basic scenery and could be compressed a fair bit, and then a transparent PNG overlay for all the stuff like lamps that would otherwise be destroyed (and since it'd be yellow+orange+transparent, it'd compress well too.
Kos - what did you use to do this; is source code available?
Well, "Chroma subsampling" is set to "YCbCr 1x1 1x1 1x1 (None)" - assuming that's the same thing.
Am I right in having a vague memory that it's possible to embed a JPG within a PNG file, so I can proceed with my plan of background+overlay, but still end up with a single file?