My contact id pictures are extremely bad looking. I noticed this on my mytouch. I had a friend send me a picture and when i went to set as contact id it just looks really grainy. I can't even see the picture.
If your picture is for contact "John Doe," create a second "John Doe" contact and save it to your phone (not Google). Attach the photo to the John Doe "phone" contact. Then link the two John Doe contacts. The picture becomes grainy if you save it as a Google contact. Something in how Google compresses the photo.
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