I wasn't sure exactly what forum this belonged in, so I took a stab here:
The droid camera has some problems, as has been documented before, but are those problems software or hardware related? Could a better application for the camera be written that would increase the performance, or are we truly limited by the hardware on the phone?
In the end, a 5 megapixel camera seems like it should outperform what the Droid actually does.
It seems as though no one really knows if it's soft or hard, but just about everyone agrees with you there.
There is a free Photoshop App that might help some.
I use Camera ZOOM FX on my phone.