I want to weigh in on the need for larger image, since I stressed about it a lot. My initial design used 118 badges, so I knew from the beginning that I would not be able to design independent graphics for so many topics. I choose a single graphic with a main topic below and subtopic in the center. See:
As to why I decided to stay with the standard 100 x 100 size, it has to do with collection lots of badges: After two or three, bigger badges will clutter up the page. If it displays, here is a category description with multiple badges:
Some topics have 7-8 badges.
Eventually, the bigger badges would eat up the page and look out of place.
Not to say that the wordy format wasn't a problem: Most graphic packages interlace the inserted text by default so it has to be shut off to remain readable in 8 pt or 7 pt size. In paint.net, I also used a bold/compact Ariel font to fit in all the words necessary.
So, my advice is to make the 100 x 100 size work and don't let Moodle compress it for you. Every resampling and interlacing will make the image more fuzzy and is better controlled outside of Moodle.