@Carmageddon I wanted to address a few of your concerns:
1) pen tool being deselected too quickly
We are working on a new method to lock your existing tool, so you can continue to use it between placing items on the canvas, but in the mean time there is also a setting available under Options (starting in 2.02 and up) which will change the default behavior to always remain on the last selected tool rather than move to auto-move.
2) pen size is not kept small
This was a design change to handle how we rendered Skitch annotations on the canvas. We are looking into a way to keep the pen tool small when you are zoomed in.
skitch severely degrades modified picture quality
Unfortunately in this case it isn't Skitch, but instead Android. While Android can (depending upon device capabilities) allow you pull in images larger than 2048 on a side (via any source) Android does not let you process images larger than that due to operating system contraints. So if you pull in an image from say your Evernote account created on a desktop and the image has a side larger than 2048, then Android (and therefore Skitch) will down sample the image on save, so that the longest side is no bigger than 2048. When Skitch down samples the image we maintain the aspect ratio, so your image will be reduced in proportion to the length of the longest side. What this means is your image will not get distorted, but may be reduced in resolution.
If, and when, Android and the various device manufacturers have a viable solution in place to avoid this problem we'll gladly roll it out. We are constantly looking for a solution to this constraint.
First of all Joe - thank you very much for the thorough response! appreciated

I understand it will take a while (probably few months..) to fix the problems Skitch 2 created to the use case scenario we Students have for Evernote+Skitch.
I would like to say, that I am not certain you fully understand point 1 - I think I cant really explain it, until you try to take a camera shot using Evernote of a board at some college, then open it for edit using the
old skitch, and adding some further notes/text/markings whatever on it quickly during lecture using Galaxy Note.
Then after trying this ONCE, you can try this again with the New Skitch - I am sure the issues will become self explanatory why we stuck with the old Skitch (1.4x I believe).
About the picture quality, I think we did not understand each other properly - the old Skitch did not do that! I did the SAME thing, of taking a picture of the board using the Galaxy Note from inside Evernote, then tapping the picture to enter edit mode using Skitch, doing all the notes, and saving it - it never degraded as badly as with Skitch 2! (only after 5+ edits over the same saved image, I started to get pixels and degrades so now I try to finish editing in 1-2 edits).
In new Skitch, on the FIRST edit, it becomes unreadable and unusable after saving for the first time... (using the same ROM and everything except Skitch version).
So, please double check this - somehow old Skitch works perfectly.
Except a minor bug where first drawing of a character after a break of writing, is being deleted as a 'mistake' intentionally probably.
Perhaps the correct solution, is to split Skitch into 2 products: one like now Skitch 2 oriented for simple devices, and one like the old Skitch, focused on Stylus users and optimized for this form of interaction?