Pictures stored in iPhone are blur or out-of-focus after upgrading to iOS4

At first, I thought something was wrong with my eyes. The pictures that I saved in my iPhone 3GS have become blurry. No, there's nothing wrong with my eyes.

This is how the picture looked like on my iPhone before iOS4 upgrade:

This is how the picture looked like on my iPhone after iOS4 upgrade:

As you can see for yourself, the resolution of the pictures have been severely degraded. One observation is that this is true for the images that are not saved in the Camera Roll folder. Pictures in the Camera Roll folder remained the same. As far as I could tell, although I did have the pictures degraded, I did not lose any picture.

If you are facing the same problem, don't worry! All you need to do is to plug in your iPhone into the PC again and sync it with iTunes. You will see the progress bar on the iTunes saying "Optimizing photos... for iPhone".

I cannot explain why my earlier sync did not perform this optimization but right now it just did. So, if you've sync it earlier on, you should try to sync again if you are facing this problem.

Did you face this problem? How many times do you need to re-sync your iPhone with iTunes before you resolve it?