I've noticed it too. I have each page set as a wallpaper from Adventure Time and the Vita downscales each one so that it's kinda blotchy. But I can live with that. What I can't live with is the lack of .gif support. My PSP couldn't do it, and I let it slide, but every smartphone now can do it so I don't think there's a good excuse for the Vita to not be able to play them. Eh.
the vita is 960x544 anything higher than will auto compress. i convert movies and upload them online for vita.
also it plays 1280P if its 1280x540 lol
anyway what you can do is change the picture resolution before you try to set it.
Studies show it is humanly impossible to play through all online content in LittleBigPlanet in a single lifetime on Earth.
Don't Forget to Play [Persona 4 Golden] Every Night Before Bed.