iPhone App Directory
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Camera Zoom for iPhone
It has to be said that the camera in the iPhone is pretty poor considering the rest of the hardware. And even my old Treo 650 had a zoom on the camera app, so why didn't Apple build one in for their camera? Who knows.
Anyway, someone else has fixed the problem (as often happens), with this app, Camera Zoom. TUAW has a review of it here. TUAW seem to by quite pleased with it overall, so I may give it a go soon.
Camera Zoom is available in the iTunes app store.
Waiting on the 3.0 update for this
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