I just checked this on my unit and had a problem. All resolution settings took pictures at 640x480 even though it was set at the highest resolution.
So after reading a post on another forum, I manually set it to 640x480, did a battery pull and reboot and then took another picture. It was 640x480, as expected.
I then set it to the highest settings and it took the picture at the highest settings. (You can tell this by the size of the picture file. The 640x480 pictures are about 60k and the largest resolution pictures are about 760k.)
But after I took a few pictures, turned the flash on and off, and tried it again, it reverted back to the small file size and lowest resolution.
Anyone know how to get it to stay at the highest resolution? I will never use the lower setting.
I'm the new guy here and still sitting on the side lines waiting a bit for RIM to tweak the bugs on their new baby, so I haven't personally tried this on a Storm but...
Try playing with the zoom. I read on another forum (so I can't take the credit if it works for you!) that with digital zoom the resolution will automatically go down as you zoom in. For the highest resolution keep the zoom set on 1x.