The camera on the Droid 1 absolutely blows, no argument from me there. In bright light, if you can hold the phone perfectly steady, it'll take a decent picture. Anything in low light or with motion of the target or your own hands, and forget it. The updates in CM allow some tweaking, and some of the 3rd party camera apps work a little better, but the bottom line is the hardware is weak.
If I want to take a solid picture, I'll bring my 12MP Fuji. Its a simple point and shoot digital camera, but its far better than any cell phone camera on the market right now.