After numerous attempts, and using the recommendations by dBurdick, I find that the JPG compression artifacts are too difficult to overcome. In order to get a decent displacement in the render, the figure itself winds up having a very fine orange peel appearance. I get a better result using a standard bump map. So for now I'm going to table this experiment and perhaps I'll find a better solution in the future.

...Insert some witty or thought provoking comment here...