Not sure what your settings are, but when you are in the camera, press the menu key and select options. Change picture size (to something smaller) and picture quality (maybe to something lower). That'll give you a smaller file.
You can change the camera settins. Open the camera, press Menu key > Options. You can change the picture size and quality -- the higher quality, the larger the file size. (whoops, Trimix already posted this)
Agreed on the media card, without it your device memory can fill up quickly and if your memory gets too low, you start losing messages, etc.