I am also experiencing the same issue. Pictures appear to be smudged and people seem like they have makeup on. Borderlines look uneven and very poor quality.
Just phoned Apple and a case was opened, yet they claim they have no records of this issue. However for me it seems like a software one, since all RAW images appear much better.
Example 1: iPhone 6 Plus on the left, iPhone 7 Plus on the right

Example 2: iPhone 7 Plus, RAW on the left, jpg on the right (same image)

In example 1 if you zoom in on the right image, you can see heavy watercolour effects which do not appear on the iPhone 6 Plus photo. In example 2 you can see the same effect.
There's definitely something wrong with the iPhone 7 Plus OIS/compression/image processing. Unfortunately I don't have the iPhone 6 Plus anymore to test further. Hope this gets resolved soon.