This is new. I am trying to view images in the EDIT listing mode (old version) and most of them are squashed smashed or otherwise distorted to make the image look gross. I have never had this happen before. I would not want to publish the item if this is what Etsy is going to show buyers. What was wrong with the old version? Oh, I know... it worked fine so Etsy must destroy it.
There was a thumbnail issue a while ago and I dont think it's been fixed properly as I am still seeing pink lines down the side of mine. Other photos were zoomed in way too much and some were just showing a coloured block.
I would try re-adding the photos to the listing.