Hey Sterling, Thanks for reaching out.
I did all above steps and figured out that it is combined Hardware + software issue. In bright day light, it works better but same camera goes down with lesser light in the room. I compare PhotoBooth, FaceTime as well as Google talk video & camera. It is not problem of software but hardware. If hardware has limitations then software can't do much optimization.
Something which Apple must fix in new MacBook model. They must provide 1080P or higher resolution camera. iPhone X is having better camera so not sure why this MacBook where individual is spending $1300 or more but getting cheaper WebCam. M1 MacBook was released when iPhone 11 was already in market which has superb camera.
Hope Apple takes this feedback seriously and improve by either providing some fix to existing customers and future MBP models.