I just put together a mypublisher.com album of old photos like yours. My mom and I went through the photos and picked out the photos of the people we knew and then put the others in another box and took those to my great aunt to tell us who the people were. It was a long process and there are still some we have no idea who the people are.
I scanned in all the photos at a high resolution and used those. Eventually I want to put together a "real" scrapbook but it's such a daunting task so someday I will get around to it.