Not bad for the price!

I'd guess that the lens is probably optimized for the traditional "snapshot": a few people standing about five feet away, possibly with something large in the background. Among other things that makes it very poor for the kind of close-up color/texture shots you're trying to do with the knitting projects.

At risk of sounding like a photosnob, you'd get a lot better pictures for $40....

If there's something you want done with a picture, let me know: PhotoShop's pretty handy with frames, captions, special effects.