http://digitalcameravideocamera.com/video-camera-resolution/
Video Camera Resolution
Is it possible to improve the quality of the video camera in my MyTouch 3G phone?
Video taken with the 3.1 Megapixel camera is broken and fuzzy. Can you improve the quality to get a SD card or faster download another application of the camera, or is a hardware problem with the camera Low resolution?
Unfortunattly No, the camera functions are related to hardware, this is the full specifications and Reviews the MyTouch: http://www.jawal123.com/PublicPages/Details.aspx?id=-624316728 as you see its a very basic camera! Good luck!