Ripped off from HERE.
Simply put:
Open image.php from /wp-admin/includes/Â NOT WP-INCLUDES!
And change the number in this line, in my case, it’s now 500. (Temporarily)
$max_side = apply_filters(’wp_thumbnail_max_side_length’,
500, $attachment_id, $file);
I’ve used this up to version 2.3.3.
There should be an option to adjust the size and quality of the thumbnail in the same area as where you upload the image. I’m going to research this since the quality is too low and I’m sure others have had the same idea.
theres another way to do this here
http://www.colingodsey.com/how-to-change-default-wordpress-thumbnail-size/