You crop your files to 960*800 on your computer, then on the phone you expand the orange crop box in the gallery with your finger to get the whole thing, and it still looks bad compared to on the computer?
Maybe I need to look more carefully, I've only used high quality/resolution wallpapers, not my personal photos. I mean if you're using something from the Fascinate cam I wouldn't expect much obviously.
If it is zooming too much a workaround would be to expand the canvas Photoshop (or whatever you use). So the photo would have edges but presumably they wouldn't show up on your homescreen since it zooms. Will take a little trial and error to see how much to expand the canvas.