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Hey there!
Not sure, if this is a lens or software issue, but images which I take with M2 are just awful. Blurred, lack of detail. I also have Xperia Arc, which is a 2+ year old phone, and if I compare images, pictures taken with M2 (8mpix) are just far worse. Any sollution to that, or is it only me lucky again with some faulty Sony phone. In short, should I return my phone back or is there any software sollution incoming? 
Greetings!
I am the original poster. I had enough, sent phone to service, they fixed it first time, did not focus at all. Second time, they replaced motherboard in my M2. Picture quality now is as should be, see it here:
As you can see from this image, photos are lightyears away from my first post. So my advice, dont mess around with updates, software from app store....take phone to service, becouse it is simply broken, camera module or motherboard (in my case replacing camera module did not help, they had to replace whole board). You will thank me later. I waited more than a year to put it to service...it made me so mad I bought Z3 Compact...now I have a fully working M2 at home...
Android 5.1 update very gud bt after the update camera quality is very poor.....
The M2 camera....
My experience is that is never was good to begin with even before Lollipop.
I had my first M2 and the camera was awful. It was blurr and the color was odd, blue obscured.
I noticed the camera lens was coated with somekind of blue coating. I looked up the internet and found several reports from users citing samething. Some useres had written they cleaned up this coating and the picture was improved.
So I did try cleaning this coating just by wiping off with the regular eyeglass cleaner and the coating was removed quite easy. Then the picture quality was improved sharply.
My first M2 wend dead so I got brand new M2 only couple months ago, it was on sale. The camera lens had same coatign but this time the pictuire was somewhat better than the first one. But still it was bit blue blurrly, so I did wipe off this coating same way. The pic was ok then.
After Lollipop upgrade, as I read many posting about camera quality has gone so bad, I started paying attention more, though I really don't find much difference from what it was before the update, I notice bit noisy, and the color is bit strange in detail. I really don't know if it got worse after the ipdate though. The camera of this phone isn't that good, so I don't really expect much.
But this update has brought just so much problems, nothing got better. I kinda notice the response got slightly smoother, but I don't know. I ever had major problenm with Kitkat, everything was working just fine so, I really really regret what I have done.
For those haven't upgrade to Lollipop. I strongly adivise. DO NOT UPGRADE TO LOLLIPOP unless SONY take care of this.