[chris1683]

Originally Posted by Q_Q

Syncing with Outlook also causes this issue unfortunately.

The work around as was the case in the Touch Pro1 & 2 is here:
Android Forums - View Single Post - How to have clear pictures on your callers profile (if using address book for importing names)

That link doesn't really provide a true workaround since once you phone sync's its contacts with Google your nice high resolution cropped photos will be scaled down and look like crap again. The only realy way to keep them high res is to not sync with Google or to keep the contacts on the "phone" phonebook and not "google."