A standard install of ZC prefers that you configure individually sized images for specific displays. (eg: _MED, _LRG). Additionally, ZC allows for these variations on size to be housed in separate subfolders of the images directory.

Image Handler 2 (IH2) module can fix your problem, as it will automatically resize (downwards) images in your main image folder, creating visually accurate (not fuzzy) smaller images, when these are required.

So, you just need to upload one large image to the images folder and IH2 does the rest.

(After installation and activation of IH2, you may have to re-set image paths and names in your product and category descriptions)