I can't help you if I don't have this information available. I can't guess what you have it set it.
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If your users are uploading SMALL images like 100x100 and you have the THUMBNAIL size set at 300x300, then a very blurry thumbnail is going to be created as its being enlarged.
Also, if you have the thumbnail size set at 300x300 and your users are uploading an image that is 100x800 (short and wide), its also going to be very distorted and fuzzy.
I can quickly tell you what the issue is if I can have a LINK to your site so I can inspect it with Firebug (it will tell me the Full Sized image size (dimensions) that are being uploaded). I had someone just a few weeks ago with a similar issue and found out that they were trying to upload wide banners (700x90) and making 250x250 thumbs from then (that just will not work).
This is not possible. The thumbnail is generated to a specific proportion. If that proportion is SQUARE, then you need to inform your users that they need to upload (as close as possible) "squarish" images (not Tall and Skinny or Wide and Short). Hope that makes sense.