Issues with distorted 'featured image'

Hi

I’m using the following code to set the size of the ‘featured image’

//add support for thumbnails
if ( function_exists( 'add_theme_support' ) ) {
	add_theme_support( 'post-thumbnails' );
    set_post_thumbnail_size( 150, 150);
}
if ( function_exists( 'add_image_size' ) ) {
	add_image_size( 'category-thumb', 260, 90, true); //300 pixels wide (and unlimited height)
}

However, when uploading an image at 520×180 or even the right dimensions are appearing distorted/pixelated.

Looking at the image itself, it’s being set as 150×150 and obviously stretching to fill the dimensions above.

However, when displaying in the post it is showing even smaller than the sizes above.

Any ideas?

Thanks