Layer Masking/Cleaning Up a Screencap [Using PS 7]

Had a good shufty around the mems, and I couldn't find what I was looking for. There are many questions/tutorials on layer masking in there, but they are either too complicated for me (and no, I'm not stupid, I just don't understand) or they are not what I'm looking for.

Basically, I want this icon: Photo Sharing and Video Hosting at Photobucket

To look like this icon: Photo Sharing and Video Hosting at Photobucket [Made by whowhore]

See the difference between the the quailty and the colour? I'm trying to get that, but so far, nothing is working.

I capped with Virtual Dub, using Photoshop 7 to edit and stuff, although I do have PSP 8 if that's any help to anyone. A step-by-step guide would be fantastic...

Any and all help is appreciated. :) Thanks!

EDIT: After all that, I actually figured it out myself! For anyone having the same problem try sharpening once after you've cropped and re-sized, then go to New Adjustment Layer (in Photoshop) and Brightness and Contrast. Move the Brightness slider first, and then the Contrast...keep the contrast at least 10 below the Brightness. I found this works really well.

Thank you to the people who answered this! It was very much appreciated :)