If you transferred over from the 1.0 site, the automatically re-sized image from 1.0 transferred over. Because it was smaller on 1.0 than the window for viewing pictures in 2.0, your images will appear blurry. The solution to this is to simply re-upload the images from the originals.
Step 1 - Select the 'Edit Listing' icon when you are on the 'View Listings' page.

Step 2 - Click on the 'Images' tab

Step 3 - Click the 'Add Images' link on your right.

Step 4 - Click the 'Browse' button next to one of the upload fields.

Step 5 - Locate the image you would like to upload on your computer and select it. Click 'Open'.

Step 6 - Press 'Save' at the top or bottom of the page to upload the images and save your changes.

If you did not transfer over from the 1.0 site, then your images may appear fuzzy or distorted due to the size of the photo that you are uploading.
The system displays pictures at 302x202 and as a result any images that are smaller then the dimensions allowed will be stretched to fit the area. This also applies to images that are bigger then the display allowed as the system will shrink the images to fit accordingly.
For smaller images, the only solution would be to use a bigger photo, following the instructions above.
Try resizing images that are extremely large in a photo editing program or even by using Paint. There are stretch/skew options in Paint that can be used under 'Image' on the top menu. Doing this may help your image display as the system will not have to adjust the portrait as much.