What don't you like about JustReader? My go to tablet reader. Pictures show up pretty good, though not perfect. As for why an app doesn't do what you want it to do, trust me, it's a stupidly hard thing to do. You'd think it would be built in to android to make that an option, but by the time you are allowed to measure pixel size, all the automatic calls have passed. It takes some rewriting of how views measure themselves. I went through that with my Read It Later app I was working on before I canned it when Pocket came out.
For the apps that overcame that issue (JustReader being one of them) you then have the problem of online pictures being small. A 320x480 picture would be about 2.7" diagonally on a 7" 1280*800 screen. If you look at a feed like The Verge that uses large pictures, you will seem them fill edge to edge (on JustReader). However, other places use much smaller pictures. Then you have the problem that a lot of places send smaller pictures over RSS. For example, LifeHacker uses ~600x400 pictures on their website, but half that size on their RSS page. I will say I wish Just Reader handled images a little better in that it still centered the picture above the text (not hard to do, but I guess that was the devs design choice), but it scales pictures up to, but not past the devices native resolution, but it cannot magically make pictures higher res. None of these can. The alternative is super pixelated larger pictures.
*I don't mean to sound like a JustReader fanboy, it's simply the app I use and have experience with. I'm sure many of the other apps handle this the same way. I also feel that this is the most "Reeder" like app I've used. In fact, I prefer it due to the more customizable swipe gestures.