Images should be sized to match the content area width of the email.
Images are automatically sized by the editor, and the largest size that you should upload is 500px wide. If you upload a 500px wide image, you can let the editor automatically change the size of it for any layout.
This auto sizing is controlled using a switch in the content properties panel after the image is selected.
By and large, you would just leave the image size set to 'auto.'
Here's an example where we set the width of the image a little smaller to give it some white space, and added some padding at the top to line it up with the text.
Because I don't want the image to be tiny on mobile view, I'll select the 'full width on mobile' option in the image properties.
This gives us our full image in mobile format.