I can't reproduce on the 3GS I have handy at the moment, and I'm using 12 megapixel images I imported to the device via iTunes syncing.
Which model iPhone do you have, and what version of iPhone OS are you running? Were these photos taken with your iPhone, or did they come from another device? If from another device, what device and what is the pixel size? Also, how did you get them onto your iPhone (eg., email, import via iTunes, etc)?
Thanks for any additional detail you can provide.
In the mean time, some troubleshooting steps I suggest:
--if these are high mpix images from another device, and you're not using iTunes to sync the images on your device, please do try that.
--If these images are from your same iPhone, and perhaps used to work but now no longer do, try doing a full Backup and Restore of your iPhone using iTunes. Once, after updating iOS on my device, several apps stopped working for me, and Restoring my device a 2nd time made them work again.