The parameters that you are passing into the DrawImage method should be the size you want the image on the paper rather than the size of the image itself, the DrawImage command will then take care of the scaling for you. Probably the easiest way is to use the following override of the DrawImage command.
args.Graphics.DrawImage(i, args.MarginBounds);
Note: This will skew the image if the proportions of the image are not the same as the rectangle. Some simple math on the size of the image and paper size will allow you to create a new rectangle that fits in the bounds of the paper without skewing the image.