With iCam and the iCamSource it is a trade-off of CPU power on the computer performing the image processing, compression, size, and overall quality of the images, and the speed at which they are transferred over the various networks. In a future version we may have some sort of compression setting to allow users to choose faster speed or higher quality images, yes.
The images that are stored on the computer in the Motion Events are actually the full-sized images, but they are compressed and resized when sent to the iPhone in iCam.