I have the original Motorola Droid, and my camera takes crappy pictures at a distance since the update. Images are very distorted. The camera takes a while to open. The phone now stalls when trying to locate and bring up a picture from the photo gallery. I will be getting the new Droid X in a few days, and I hope this phone does not have the same problem.
This may or may not work for you, but I had the same issue.... I changed my camera settings to Infinity, under auto focus..Flash is set to auto...Exposure is set to "0"...
after you take the pic, upload them to twitpic, facebook or your comp, it might just be the droid preview. If not, try a different camera app.
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