iPhone Simulate increase size of objects?

[Brahmanathaswami]

Just getting started with mobile: read lots of tutorials, built apps 
along with Ben etc. I have my apple develop license for some time and 
xCode etc.

Built a small stack for iPhone 960X 640 placed an image (lock location 
set to true) and a field.

So far so good; set standalone app settings and ran the simulator with 
iPhone as target.

My image appears at it's original size (huge!) in the simulator.. .as if 
the downsize I had effected by just dragging the end points of the image 
rect to fit on the screen and then setting the loc location to. are not 
"accepted" in the simulator??

and my opening field was also enlarged.

Why?

Screen shot of stack as layed out:

     http://wiki.hindu.org/screenshots/iphonesizestack.jpg

Screen shot of what the simulator generates

   http://wiki.hindu.org/screenshots/inthesimulator.jpg

What am I doing wrong?

BR