No, there aren't any resolution settings in iCamSource. iCamSource gets the default video output from the webcam, but for some reason, it's getting a low res version from your camera.
You mentioned in your first post that the image looks fine in other programs. What programs have you tried with your webcam? Have you tried any of the well-known video chat programs, such as Skype (or any other non-Intel program)? Have you seen any image display problems with any of the other programs you've used?