I have installed 2.0.3 via fantastico -- have tried a few different themes and have the same issue.
No matter how i insert an image it appears as a small thumbnail. I have used the pop-up menu to try different options and the image is still small. Only way tto change it id to adjust the html code and make the hieght what the orighinal should be. That shows the original picture in the blog.
Any idea what causes this issue?