Once you have reduced the image size, use unsharpen in PS or one of the proprietory sharpen plugins like "Ultra-Sharpen". Some suggest you reduce the image size in stages at say 10% reduction a time, sharpening after each reduction - could take 4/5 stages, see what works for you.
Best size for TW depends on your screen size, most advise roughly a ratio of 1:3.5 i.e. screen size 400x300 - final image size 1500x750 if you screen size is smaller i.e. 300x200 a final image size of 1200x600 would be fine. Screen size 600x400 final image 2000x1000 etc etc
Its all down to trial and error really to find settings that work for you. I prefer to use a final image size of 2000x1000 for a 400x300 screen size,and then save for web - the file size ends up a bit bigger but I find the quality is better.