Image loses major quality as soon as it is rotated in Photoshop CS5

I’m trying to create an image in Photoshop CS5, in the image I have smaller images that need to be rotated (25-40 degrees or so), but as soon as I do that they lose quality and you can see zig-zag edges and hard to read text, I made the smaller image into a smart object, but it does not fix the problem, I know it can be done because I’ve seen rotated screen shots online and they are of good quality, and not vector images either, so what is happening? The image I’m trying to rotate is 1024×768 resized down as a smart object, so the quality to start with is not too great.

PS: The image is of a website screenshot, I’m trying to put it in a portfolio.