The most I have ever done with the portraits is uncompress them, I have never tried to edit them or anything but my guess is something did not convert right when you saved to jpg. I have two suggestions for you. #1 Don't save the file as a JPG, save as DDS and open with PS or Gimp, edit and save and then re import into the portrait.iif or best choice #2 Go here
http://forums.nba-live.com/viewtopic.php?f=150&t=88352 and read the tutorial, probably much more help than I can offer. Good luck
Edit:
I just did this, I did not test in game
Uncompress portrait.iff
Extract the correct photo
Save as DDS
Edit it and save as either PNG or DDS
Import back into portrait.iff
All went well, no errors
If you save as jpg you lose the alpha channel which I think is the error you are getting