How to improve camera quality in ARKit
config.videoFormat = ARWorldTrackingConfiguration.supportedVideoFormats[1]
I had to look for a while on how to set the config, so maybe it will help somebody.
Update: Congrats to whoever filed feature requests! In iOS 11.3 (aka "ARKit 1.5"), you can control at least some of the capture settings. And you now get 1080p with autofocus enabled by default.
Check ARWorldTrackingConfiguration.supportedVideoFormats for a list of ARConfiguration.VideoFormat objects, each of which defines a resolution and frame rate. The first in the list is the default (and best) option supported on your current device, so if you just want the best resolution/framerate available you don't have to do anything. (And if you want to step down for performance reasons by setting videoFormat, it's probably better to do that based on array order rather than hardcoding sizes.)
Autofocus is on by default in iOS 11.3, so your example picture (with a subject relatively close to the camera) should come out much better. If for some reason you need to turn it off, there's a switch for that.
There's still no API for changing the camera settings for the underlying capture session used by ARKit.
According to engineers back at WWDC, ARKit uses a limited subset of camera capture capabilities to ensure a high frame rate with minimal impact on CPU and GPU usage. There's some processing overhead to producing higher quality live video, but there's also some processing overhead to the computer vision and motion sensor integration systems that make ARKit work — increase the overhead too much, and you start adding latency. And for a technology that's supposed to show users a "live" augmented view of their world, you don't want the "augmented" part to lag camera motion by multiple frames. (Plus, on top of all that, you probably want some CPU/GPU time left over for your app to render spiffy 3D content on top of the camera view.)
The situation is the same between iPhone and iPad devices, but you notice it more on the iPad just because the screen is so much larger — 720p video doesn't look so bad on a 4-5" screen, but it looks awful stretched to fill a 10-13" screen. (Luckily you get 1080p by default in iOS 11.3, which should look better.)
The AVCapture system does provide for taking higher resolution / higher quality still photos during video capture, but ARKit doesn't expose its internal capture session in any way, so you can't use AVCapturePhotoOutput with it. (Capturing high resolution stills during a session probably remains a good feature request.)