One of the most common questions we get (particularly from iTouch users) is "Why do my pictures import as teeny-tiny, then when I make them bigger they look all chunky?" The short answer: you're importing low-resolution images, and that's how they'll look if you were to print out your page at high resolution.
The longer answer is that we didn't design Coolibah™ to be a "toy" scrapbooking application. We built it from the start to produce print-quality pages at 300 dots per inch (dpi). When you're working on a page on your iPhone, you're actually working on a page that could be reproduced as an 11"x7.5" page at 300dpi. That's a serious scrapbook page! That's why importing photos taken on the iPhone (usually) appear to be "normal" sized on the page. We're showing you what they would look like on a full-sized printout. Not all pictures are created equal.
In this example, we start with a high resolution picture of Scrappy™ (300x300 pixels, roughly) and shrink her down to fit in a 100x100 pixel space. The resulting image looks great, because we're removing detail to create the smaller image. 300x300 pixels 100x100 pixels:

Now, let's take a different case. We start with a lower resolution image (100x100 pixels) and blow it up to 300x300 pixels:

The resulting picture looks pixellated and chunky, because the computer has to make up detail where there wasn't any. This is what would happen with the pages you make using low-resolution pictures that you blow up to very large (on the page) sizes.
I can hear you all saying "That's great, but what do I do about it?" The best thing to do would be to use higher resolution pictures. But barring that, leaving your low-res pictures at the same size that Coolibah™ imports them will guarantee that they'll look good when you do a high-resolution export of your pages. One way to handle that is to shrink the elements, frames, etc. down to match your low-res pictures and then after exporting, crop the resulting image. Sorry it's not great, but that's what you can do for now.
The real answer – which we are working on – is to support multiple page sizes (like small, medium, and large). Right now all you have is large. But with smaller pages, you could include low-resolution images and just create smaller physical pages in the end. We have that on our list of features for the next release, and we'll keep you up to date on the next update of the app. Of course, assuming that Apple doesn't make us wait three months for approval like last time...
I hope that that answers some questions about pages and images. One feature that we really want to be able to offer soon is the ability to generate printable scrapbooks with the full 300dpi artwork of your pages. That's why the app is so picky about having high-resolution photos.
Thanks for using the app and keep your eyes open for new kits, updates, and artwork from your fellow scrappers!