I am suprised about the camera. I was told point blank that since Canon would not allow anyone to service the camera that the warranty was an in store replacement warranty. The next time you are there I would push that point. I do know that they carry two types of warranties. One is a service warranty and is usually cheaper and for that one they do send it out for repairs. The other one is the replacement warranty and for that one you are not supposed to leave empty handed.
As far as the soft picture issue, while I have not seen any of you pictures I do know that most pictures that come right out of hte camera may appear soft. Some of this can be controlled by the custom settings in the camera. They are the Set 1-3 and the Parameter1 and 2. You may want to try to customize one of the custom settings and raise the sharpness up a notch or two to get the desired effect. I find that most of my pictures could use sharpening with settings of 2 for the radius and 80 for the amount. This brings it up a little but not to much. For me I like a slightly soft look over the to sharp look for most pictures.
Feel free to either call me or email me directly if you need help with the settings. You can also send me one of your picture right out of the camera and I can take a look at it to see if it matched what I see from mine.