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I don't think it's the face detection, because the blur is very drastic. It's not gradual like depth of field is. There's something on the lens, or something up with the sensor and as I said, it's probably only showing up at a certain focal range or aperture.
Thanks guys. The camera obviouslly has something wrong with it. A friend of mine thinks its the sensor. Looks like I have to go back to my big olympus. I'll take pics tomorrow with it and see how that works.
Kara- Thanks, the decals can not be bought anymore. Ford said no more to that. lol. I had them from about a year or 2 ago.