It should be fine for the purpose intended, the Nintendo DSi only has a 0.3 MP camera and people still use it. It will be fine for those in the moment pictures, which is what this will be used for. I have a digital camera too so if I want to take pics of things that matter, I would use that.
I also assume this can be used for apps, like barcode scanning, which is what I really wanted it for.
Honestly I think we should be happy it got a rear camera. Lets face it they could have given us just a facetime camera (somehow) and people would have still bought the device. Heck people would buy the device regardless of what apple does. After last year's update, I am satisfied.