The front facing camera is really meant for video chats like Skype, Gtalk, etc. Use a digital camera or your smartphone to take pictures. The next N7 will have a good second camera for regular pictures. I think there is a way to get pretty hi-res video from the current N7.
The camera wasn't really meant to be used for taking pictures. Like Groid said, it's only for video chats where the low res camera helps with bandwidth.
Yea, the front-facing camera isn't ideal for taking still shots, and it was never meant to. Unfortunately, there really isn't anything at all that you can do to improve its quality.