From the pictures you provided and my own observations from using the camera, it appears to me that several factors contribute to the poor quality:
* bad light sensitivity
* amplification noise
* washed out colors
* poor focus
The light sensitivity has to do with using a cheap CMOS based camera. The grain and noise that can be seen stems from amplifying the CMOS signal significantly to produce a viewable image. The colors looks like a software problem. Poor focusing comes from using a plastic lens with fixed focus.
Better firmware could sort out the washed out colors, and it might be possible to decrease the amount of noise in the amplificiation process. I believe however that at best the camera will pass as poor.