I have version 2.2.1.
I too am noticing the odd colors, pixelation and poor quality.
This was not the case previously.
The pictures were better quality but now I no longer will use my iPhone for pictures.
If I use the camera application that comes by default, the resolution is 1600x1200 at 72dpi with 24 bit depth and 2 resolution unit.
If I use the Darkroom application, a free download from the app store, the picture is 1600x1200, @ 96dpi, 24 bit depth, no resolution unit set.
Not great but closer to the quality the pictures used to have.