Waveshare V1 camera binned modes have terrible quality?

[paol]

Take a look at these stills from videos recorded at 1296x972:

Command: raspivid -t 10000 -md 2 -w 1296 -h 972 -fps 15 -o test_md2.264
Result: http://i.imgur.com/vW2oks8.jpg

Command: raspivid -t 10000 -md 4 -w 1296 -h 972 -fps 15 -o test_md4.264
Result: http://i.imgur.com/qvhjCLL.jpg

These are taken a Waveshare RPi Camera G, which is basically a V1 camera (OV5647 sensor) with a different lens. The first video uses mode 2, which records at full native resolution (2592x1944) and then resizes before encoding. The second uses mode 4 which records at 2x2 binned resolution (1296x972). (You can find the modes tables here.)

Wasn't binning supposed to increase image quality? I would have expected at least similar quality, yet the binned mode is terrible. It almost looks like it's being recorded at 1/2 the requested resolution and then upscaled.

I guess my question is, is this normal?