Yes, the original thumbnails were 128x96 (or 96x128), I just doubled it to 256x192. This seems to work fine for me using firefox.
However using Internet Exporer I still get small images. Under IE, the code that strips the extra size tags from the image when it gets sent to the editor seems to miss the height tag. (you can see this if you click on the HTML button in the editor, every thumbnail will have a height=128 tag) This seems to stem from the line 426 in
h = h.replace(new RegExp(' (class|title|width|height|id|onclick|onmousedown)=([^\'"][^ ]*)( |/|>)', 'g'), ' $1="$2"$3'); // Enclose
attribs in quotes
Which doesn't quote the attributes. Changing it to this:
h = h.replace(new RegExp('(class|title|width|height|id|onclick|onmousedown)=([^\'"][^ />]*)', 'g'), '$1="$2"');
Seemed to make it work.