Great, finally someone to pick this up.
If I were you I'd also ask the developers, I think they have very
detailed ideas of how the whole thing should be dealt with already. As
far as I understand, figures should _not_ be converted into eps since
this is entirely unnecessary. LaTeX can handle figures in jpeg and png
for example just fine assumed that you can use the graphicx  package. To
represent the figure on the screen you need to convert it to a bitmap
sooner or later and that's what ghostscript is doing now. Again, all
this isn't really necessary but as it looks like the current code needs
a fundamental rewrite.

Roland

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