Hey GrackieGrackieGrackieGrackie,
If we understand correctly, you used Optimize iPhone Storage for Photos and now the photos are blurry and have an exclamation mark on them.
Are all photos blurry with an exclamation mark?
How much storage space is available on the iPhone?
If you open a photo, does it try to download?
"With Optimize Storage, smaller, space-saving photos and videos are kept on your device while all of your original, full-resolution versions are stored in iCloud. And as long as you have enough space in iCloud, you can store as many photos and videos as you want."
Manage your photo and video storage
"Go to Settings > General > [Device] Storage. You might see a list of recommendations for optimizing your device's storage, followed by a list of installed apps and the amount of storage each one uses. "
How to check the storage on your iPhone, iPad, and iPod touch
Please don't hesitate to let us know if the steps resolved your issue or if you need additional assistance.
Thank you for using Apple Support Communities. Have a good one.