I'd pony up the dough for a better camera.
That thing has a resolution of 320x240 and it is going to compress the hell out of the photos. Here is an example of what it will probably look like. This is a 320x240 pic with heavy compression.
[img]http://members-http-1.rwc1.sfba.home.net/jeff.hoeft/pics/320.jpg[/img]