Firstly it looks like your sequence is 720x480, i.e. standard definition DV NTSC. This is the default sequence for Premiere, and has been since dinosaurs roamed the earth. Since it's about 1/16th the resolution of your image, not to mention that the pixels are non-square it's no wonder that there will be some quality loss.
If you're finishing at 720p (i.e. 1024*720) you should set your sequence to match. You'll have to either start a new sequence using the HDV 720p setting and copy everything across to it…
or cut everything from the timeline, change the sequence settings to match those in the picture below and paste everything back.
N.B make sure that as well as setting the right resolution you also choose square pixels for your pixel aspect ratio. To make your clips match the sequence size you can right-click them and choose Set to frame size. If there are a lot of similar clips you can do the first one, copy it, select the rest and choose edit>Paste Attributes.
Secondly, you're better off creating your image at the final resolution - you won't gain anything by working at a higher resolution than your final product. Working at the native resolution also gives you a good idea of how it's going to look. Photoshop has film and video presets, so choose the correct one when you're setting up your image file.