IMac 2011 HD Camera not HD?

I've just picked up a iMac 27" featuring a HD camera, however it doesn't appear to render in HD on the viewed playback.I have seen other similar threads, here is my experience.
FaceTime - not unusuable but blurry, no sharp focus at any distance, looks like SD, over exposed or contrast on subject (me) areas in bright light.
Photo Booth - as above. Photo taken shows as 720 but doesn't look it.
QuickTime Movie recording - as above, even set at Maximum Quality doesn't look like 720.
Bad camera (I hope not as it is a pain to return for fix) or software issue?
Anyone else experiecing similar issue?

Turns out to be a bad camera - a really bad camera in comparision to others I checked in an Apple Retail Store. Contacted Apple Care and iMac will be replaced by Apple.

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