Seems alot of pixelation is going on there.
You can really see it in the sky..
That's not pixelation that's noise and it really isn't any worse than the amount of noise in some of the full size iPhone 4 photos I have seen posted like this one.
Being fixed focus closeups with the new touch won't be very good, as you can see in a couple of the other sample photos like the Pepsi bottles and the yellow post they look somewhat worse than the others because they are a little out of focus. A step or so further back and they would have been noticeably sharper. By taking a handful of test shots starting close to a subject and then moving a small step back between shots you could quite easily get a pretty good idea of the minimal focal length of the lens and avoid those sorts of shots.