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As I known, the contact photo will use small one(96*96) at top left corner if you are using social network phonebook. 96*96 is the also standard pixel in Outlook and Gmail.
the picture in link below has changed.
hey uliwooly i just check the above link given by mr.lu and in their contacts also , its the same small box..
i think then its was the idea...
yeah, bummer, over pixelated picture though
well yes thats the issue...
in timescape it blurs the image even more