So, do I keep the high resolution at the expense of longer delays, or do I sacrifice resolution for shorter delays?
It depends, what is the subject of your timelapse?
For example: For a car ride, the frequency is as high as possible, 1 photo every 1 or 2 seconds. On the other hand, for a timelapse of a building site, a picture a day is enough.
I normally keep the size to 1600x1200, you can always reduce it for web. I also try to reduce the delay between shots, although I have to change 2Gb memory cards every 1/2 hour. The larger the card, the better.
Depending on your camera model, you can also reduce the JPG compression quality instead of its size.