It is feasible to do a partial decode of the JPEG to get only the DC components of the image (which are only delta coded) and form a thumbnail and process that, but with a source image only 160x120, the thumbnail would only be 20x15.
I have done this in the past, but the processor was 32 bit, a little faster and had a barrel shifter, which made unpacking the Huffman-coded image quite a bit quicker.