It takes very grainy pictures in cloudy weather and at dusk. Even a very basic digital camera won't have this problem. Wonder if there is any solution, or it is a factory defect.

Grainy picture is generally due to poor light conditions.....move to higher ISO.......also check the clarity of the lens

Hi Usually outdoor picture are good within small compact camera. They designed like that. But now your unit just have flash pcb defective. When flash function work, your picture will be good indoor. Regarding your flash unit would be brown fuse or replacement of flash unit. It is 50 and 50 chance. Your local repair shop would charge around $35 to 95 depend on what they really want to charge. Thanks and best regard!

Taking pictures with maximum level of details while it is overcast weather is much easier than in sunny weather, where you need to look for so-called "open shadow" to limit overexposure.
Depending on your taste, the best possible setting would be one of the built in auto exposure modes for cloudy weather. You might also want to try adding some flash while taking photos in open terrain - it will not work miracles, but will add light to your subject (however, flattening some details). You might also consider overexposing in the camera settings to get more details, when there is not much ambient light.
Usually how it is done is that photos are edited in post processing to get all the required details. And overcast weather gives a nice, even exposure.
Using such a camera is always a compromise between image quality and portability/easy of use.
Consider reading http://www.istockphoto.com/forum_messages.php?threadid=40649

If you are taking pictures in low-lighting conditions without flash, then the pictures will appear grainy. Set the ISO to a lower number (try ISO-100 to start with) and use the flash to compensate for low-light conditions.
This should improve the grainy appearance of your photos.

You need to check your ISO setting and the picture quality you have your camera set to. It should be at the maximum megapixels and fine quality and the ISO should be below 800 or even 400.

maybe you zoom in a lot and then it would be normal and if the pictures come out fine, i wouldn't worry about it but if the print pics come out grainy and blurry i would take it back if you have warranty

Problem is your CCD has failed. Expensive repair.

The grainy effect has to do do with the ISO setting, try adjusting that. A higher ISO is generally better for darker conditions. I have noticed that this camera frequently takes grainy images.

I had the same problem, but all of a sudden it went away. Did it go away for you yet?

As basic as it sounds, is the lens dirty? The tiny surfaces of digital cameras' lenses really affect image quality. Also check the image quality setting to ensure you're shooting at a high quality setting.