I have a client who is seriously unhappy with the way their product thumbnails are rendering on Magento.
The dodgy appearance is noticeable on two accounts:
You can put your own Gd2.php file in local (app/code/local/Varien/Image/Adapter/Gd2.php) and hard-wire the quality to 100%.
Quality is working for me so I have not done that.
You can also put an image convolution in there to sharpen your images, in that way you get the blur of a resize compensated for with a sharpen, e.g. put the following just inside the end of the 'resize' function:
$sharpenMatrix = array(array(-1,-1,-1),array(-1,24,-1),array(-1,-1,-1));
$divisor = 16;
$offset = 0;
imageconvolution($newImage, $sharpenMatrix, $divisor, $offset);