I have firmware 1.2 as well. Another thing I've noticed - I have a woven Christmas tapistry hanging on a wall. Without using the flash, the colors are all washed out - red appears very drab if not almost black. This is when using IA, Normal Mode, or any of the SCNs.
If anyone is getting good results with this camera, I'd sure like to know EXACTLY what ALL of the settings are for the particular shot at hand.
In normal mode -
Picture Size 10m
quality: high
Aspect ratio: 4:3 (also shooting 16:9)
Intelligent ISO: OFF (have also tried with it on)
ISO Sensitivity: Auto (Have also tried setting 80 through 400 so far)
White Balance: AWB (I've also manually balanced to try to get more realistic color)
Face Recog: OFF
AF Mode: Depending on situation have selected multi, single, spot, face, etc...)
PRE AF: Off
Metering Mode (*) - have also tried ( )
I.EXPOSURE: OFF (I haven't seen much difference with it on or off)
BURST: OFF
DIGITAL ZOOM: OFF
COLOR MODE: Standard - but I've tried them all. Vivid may be a bit better, not sure
STABILIZER: Mode2
MIN SHTR SPEED 1/8 is default (maybe play with this a bit more)
AUDIO REC: OFF
AF ASSIST LAMP: OFF
rab - have you taken duplicate pictures with a different camera under the exact conditions and compared them with the ZS3? That's what I should have never done......