I too am having this issue. All images displayed are also blurry. It's weird, Woocommerce claims full compatibility with the basic WordPress themes, but this is Twenty-Ten I'm using and still... blurry images! I tried some fixes online but nothing.
Some images are cropped in half and there's no reasoning behind this. I always upload the same type and size of image files yet some are shaped normally, others are cropped, then anything displayed at the bottom of an item's post is all blurry and looks like they are from the 1990 internet.
Any help would be greatly appreciated. Does Woocommerce (Woothemes) plan on fixing this in a future update? It never seems to be addressed.