Interesting how the Apple engineers tackled this "problem." In iPhoto 4, when you double-click an image to edit it, iPhoto would perform this progressive type load of the image. You would get a "blurry" full size picture that at some point would snap into clarity.
iPhoto 5 handles this differently. When you double-click on a thumbnail, you get instead a mid-sized photo, about 320 x 240 that is sharp while iPhoto loads the rest of the image information. Then the image snaps to a full size picture (meaning that it fills your editing space) that is nice and sharp.
I think this approach is better. You're always looking at a sharp image, regardless of the size.