The problem I’ve been having since I started this blog is the following..
When uploading a picture from your computer with the Blogger Uploader it never shows up in
the original size you wanted it to be.
You can then use the following options when clicking on your picture:

This gives you the opportunity to resize you picture to Small / Normal / Large / Extra Large.
Personally I never used this way since I always manually adjust the size in the HTML.
The problem with Blogger Uploader is that when I upload photos in the posts, no matter what size I upload them as, the quality is pretty poor. I was always wondering if I was doing something wrong.
I fixed this problem by uploading the pictures somewhere else and then ‘Link from web’ when uploading with Blogger. This did the job too but the problem is that there will be no pictures displayed on blogrolls when you make a new post..aargh!
Check below for the difference in quality..weird right?!
BEFORE
AFTER

SOLUTION:
Apparently the poor quality is due to a high compression ratio used to create the thumbnail. Edit the post HTML and look for <img src=… . The string following is the thumbnail URL. Check to see if there something like /s320 in the URL. If there is, delete it and publish the post. The browser will now display a scaled image with higher definition.
Voila! Badass quality just like the original, whohooooo!
Even if you were pretty satisfied with the way your pictures look in Blogger when uploaded I recommend trying this solution anyway, who know if it gets better for you too
Hope this was helpful!
~Iris