Yes... If you go into the settings and change the resolution to 800x600, it'll not only look better but you'll be able to take more pictures because they won't be as large and won't take up as much space on the card or on the internal memory, whichever you're using.
A 35mm camera is great too, however you have to pay for film...
This is the perfect time of year to consider upgrades... Black Friday is a little over a month away, and retailers are ALWAYS running outstanding deals. I got my camera a few years ago (7.1 megapixel) that was a little more than half-price (got it for $169.99, normal price was $289.99) due to those deals.
I would recommend anything 6 megapixels or higher... That way you're guaranteed a good camera for whatever you're using it for, whether ghost-hunting, vacation, whatever.