So I also downloaded your file and did some testing.
The flag you keep seeing "Serves images with low resolution" is basically telling you that there is a difference in what is displayed versus what is expected. To make sure that images are clear for all devices, it wants to make sure your image ratios are the same. If the image ratios are the same then when an image is scaled it won't be distorted. We all know with a small image that's enlarged usually always look pixelated which we don't want either. It also means that we want to show Large images on desktop and smaller images on mobile to help with speed and performance.
In my tests, I simply found removing the 'generate thumbnail' fixed the issue. I changed nothing else. And yes, this is for mobile. Here was the scores:
So if you are serious about improving your site, as based on this thread, for performance, speed, etc, I would also suggest the following.
1. When using the photo gallery I would make sure the image I'm using is resized to the biggest it needs to be on the screen. So for example, you have an image that is 1200x1685 (Fantasy-Art-Images-0687.jpg). There is no need for this image to be this tall as it wont fit on most monitors per the height. I have a large monitor and my height is only 1080px. So I would suggest reducing the size of this image to below 1080px to something like 800px. I would make sure all my images are resized to be no more than 800px high so that everything is consistent. This will help reduce the file size thus your page will load faster.
2. I would also look at compressing your images. Many of your images are large and can be compressed further for speed. For example, your image "Fantasy-Art-Images-0685.jpg can be reduced almost in half from 423kb down to 249.6kb. That's a 41% savings in size. Now take this times all your other images and you can save a lot which will help immensely in faster loading. Visit
https://tinyjpg.com to see how much you can reduce them by.
3. Many of your images are missing descriptive Alt tags. Naming them "Fantasy-Art-Images-0685" is not very descriptive. I would advise you to look into adding more description about the image. It may take you awhile but it is worth it for screen readers.
You brought up a solution as using "srcset". This is available using the picture object. However, keep in mind that this solution involves YOU creating multiple sizes of your images (usually 3-5) for EACH image. By doing this, the browser then can pick the best image to show based on the browser size. Will this make Lighthouse happy? Yes! But, based on the # of images you have, are you ready for this monumental task of creating 3-5 times the images needed?
As far as i'm concerned, if you are scoring in the green then you score an 'A' and should not be so obsessed with removing every flag. If you are, then I would suggest you start reading up on these flags, learn some html and CSS and possibly implement your own solution if need be.
I know, I know, you are going to say "but that's why I bought WB16 so it can do it for me". I'm sure Pablo will take in consideration this information and if something can be done to improve the software he will in due time. Until then, you may need to live with an 'A' versus an 'A+'.
Just as a note, Tescos scores way worse than you and I don't believe their traffic is being altered because of it. Heck, if they had used WB, they'd probably have better scores.