Same problem here. I've had it since day 1 and just assumed I was doing something wrong, but after about a year and a half of exhaustively pouring over every guide I could find and an embarrassing incident in which my sister was snapping WAY better photos than I was from the front row of a concert (remember the commercial where those people tricked their friends into thinking they had better seats at a concert than they did because their zoom was so great?) with her iPhone 4.
I've scanned this whole thread and not seen anything that will help (troubleshooting guide is useless). Anyone here know anything I don't? Like the rest of you, I payed out the nose for the thing not for the phone itself but because photos are so important to me and am gutted to see it can't even do that right...