In this paper, we address issues regarding bi-level image compression using JPEG2000. While JPEG2000 is designed to compress both bi-level and continuous tone imagery using a single unified framework, there exist significant limitations with respect to its use in the lossless compression of bi-level imagery. In particular, substantial degradation in image quality at low resolutions severely limits the resolution scalable features of the JPEG2000 code-stream. We analyze these effects and present two efficient methods to improve resolution scalability for bi-level imagery in JPEG2000. It may be noted that both proposed methods are compliant with Part-I of the JPEG2000 standard.