Default thumbnail size is 250x250
Manipulating the thumbnail size in the editor keeps the same 250x250 visual information & simply magnifies it to fill a different sized "frame"
Reducing the thumbnail size gives a sharp resized image.
Enlarging the thumbnail gives a progressively blurrier displayed image.
Clicking on ANY of the thumbnails displays the original full-size image.
Bill - you have demonstrated the characteristics as they are now. I am absolutely certain that this is different from the situations previously. Prior to the change I was able to enlarge thumbnail inserts and produce a sharpe image. As you have demonstrated that is no longer the case.
As I said, I've never tried it before, so I don't know whether it's changed or not. What I DO know is that we designed it to be as easy as possible for unsophisticated users to post useful photos. And before Tom & I worked on it, it was nearly impossible for casual users to post decent photos if they had a camera that defaulted to photos larger than 800x600. We used to have several posts every day asking "How do I post photos?" simply because they were attempting to upload photos that were larger than the system could accept & process. Sophisticated users have always had to jump through hoops to get exactly the display they want in their posts. If I were you, I'd wait until the new system is online to try to learn any new hoops if they have changed. The hoops will probably be moved/resized when the new system comes online anyway. Tom says the new image handling is better. But I haven't seen it, so I have no way of knowing what's changed.