The problem is that the image is not actually resized by Magento - it just displays is smaller by setting the width and height in HTML. Thus the browser is doing the visual resizing and some browsers do this better than others.
To get a better display, you need to to use the a resized picture on the product display page and then use some other zoom tool to zoom to the big image.
So basically we neeed to disable Magento’s resize tool.
I really really strongly believe this is not just the browser, but maybe how the browser interacts with the tool.
I have used several other image zoom tools just like Magento’s in IE7 and they were never jagged
This is why I wanted to call this a bug.
I dont even think IE 8 was out when this tool was implemented so someone must have overlooked the problem.
You dont see the problem except with straight - diagonal lines. On rounded images its not there.
I understand that putting a pre-sized image as the product image will fix this.
However you will then not be able to use the inner-zoom tool because it will just get blurry, trying to increase a small sized image.
So there really is no acceptable solution to fixing this problem.
If you have to hack the default install to get it to do basic functionality, then I think that constitutes a bug.