You also have the option of printing your own transfers on transfer paper. I highly recommend JPSS (Jet Pro Soft Stretch) printed with pigmented inks for white or pastel shirts. My wife is wearing a T-shirt we made a few months ago with this paper, printed it with Canon pigmented inks and it has been washed numerous times. It still looks great.
As far as JPGs go, many screen printers (folks that make plastisol transfers) are going to want vector artwork. JPGs are not a very good format for anything except internet graphics IMO. If your creating in Photoshop, save your file as a native PSD and then as an uncompressed tif, bmp or png format.
Check out this thread http://www.t-shirtforums.com/inkjet-heat-transfer-paper/t122325.html