Well if you have made a skin at 512x512, you really don't have any 'good' options for uploading that design to LFSW because yes it only accepts 1024x1024. If you try to resize the image/skin from 512 to 1024, it will look blurry, and you cannot do any resampling to a larger size, you will lose quality. If you did everything in vector, you wouldn't have a problem, but I am betting you are new to all this and new to Paint Shop Pro.
I wouldn't advise resizing the 512 skin to 1024, it will just look crappier. You should just take a 1024x1024 default skin that is included with the LFS CMX Viewer, and paint on that. Then once you are done, you can upload that to LFSW just fine.