There is some buzz around for the picture quality getting reduced on Blogger while uploads. That might be just a small issue probably. If you notice this is happening on your blog consistently, do not get worried, there is a solution.
A. Default Setting in Google+ "Auto Enhance"
In Blogger's Google+ Account > Settings there is an option called "Auto Enhance"
This says automatically enhance new photos and videos.
If your images are getting blurred after upload, (this is happening with many) uncheck or OFF this option. Also keep photo upload to "Full size".
Alternatively Go to Google + Settings > Photos > Highlight All photos and select Apply Auto Enhance to Off manually. This will take some time depending upon number of images and total size. Be patient!
Settings will be saved automatically!
In some templates Blogger by default consider the lower size to fit the page. This is nothing to do with picture quality still some bloggers annoy for why it is uploaded to lower size? Here is an answer.
Step 1: Go to Dashboard > Posts > New Post
Upload any good resolution image. If It looks like below, try the suggested changes.
<a href="http://4.bp.blogspot.com/-ZycYOKRdgS4/U0DPGhnKeEI/AAAAAAAAABo/-tRdiI_j5RY/s800/Bear+image+from+natgeo.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://4.bp.blogspot.com/-ZycYOKRdgS4/U0DPGhnKeEI/AAAAAAAAABo/-tRdiI_j5RY/s800/Bear+image+from+natgeo.jpg" height="240" width="320" /></a></div>
Step 3: Remove "width: 400px; height: 300px;" from above codes.
In some templates it also goes upto s320. Just make sure it is s1600 to display full image.
Step 4: Change highlighted value from 400, 600, 800, 1200 to 1600. s1600 is full image value. Changes in these values will not cause any original quality change in the pictures.
C: Using Picasa Web Albums for quality image uploads
Instead of uploading images from your computer try to upload images from your own Picasa Albums. Picasa is a place where all the blogger images are hosted. Upload additional images there and then pull them on blogger to maintain original quality.
Additionally you can organize those images in Picasa Album simply to serve you in future as well.
Hope this works! If you have any other hacks or tech tips, pl share here.
Also see: Where does the Blogger's images are stored?