I'm not convinced that's a major problem. Possibly the frame rate will be bad too but that shouldn't get in the way of its utility. Except maybe for those interested in seeing through clothes.
Actually, if you look at the gallery they have up of actual shots, the framerate of the videos isn't at all bad--maybe 5 fps?--as is the resolution. Looks like somewhere in the ballpark of 150x100, which is not at all bad given how tiny it is and the reasonable price. Certainly good enough for consumer uses like finding leaks, insulation problems, studs, animals, etc.
It also looks like they're using the iPhone's built-in camera with some sort of edge-detection filter to add an overlay when there's visible light to give added virtual resolution and a better idea of what you're looking at (so you can see markings on the wall or objects that don't have a temperature gradient), which is pretty cool. I actually wish the older (and wildly more expensive) pro camera we had at work did that. Maybe their newer ones do, not sure.
I'm seriously considering getting one of these, that's for sure--it's practically worth $350 just for the awesome factor, and being able to find leaks and insulation issues would make it justifiably useful.