General :: Camera Apps Not Taking Full Advantage Of Resolution Capability?

My current mobile phone is an LG/Sprint Optimus S, whose camera has 3.2 mpx resolution. My previous (and first) smart phone was an HTC Pure which runs Windows Mobile 6.5 and is perhaps better known as the Topaz, Pure being its AT&T edition. The camera on that phone does 5.0 mpx, so it's obviously much better. Even on just the small device screens, you can see the quality difference at a glance.

For a particular objective, I need to be able to take good pictures on the go, but have the Internet connection provided by my current Android device. In other words, I want to take pictures with the HTC, beam them to my Optimus, and then use that to send out the pictures. I was having a bit of trouble getting the devices to work well together in their native states, so I flashed a version of Froyo onto the old HTC. Having done that, I found that the Bluetooth connection between the devices worked quite well. But when I try to use one of the Android camera apps to take pictures on the HTC, it's not taking full advantage of the lens' capability. The photos show up on the screen about the size of a large postage stamp; in fact not much bigger than a thumbnail picture.

Do Android camera apps not work at any better resolution than 3.2?