Try regenerating your thumbnails that are being used for the site with: http://wordpress.org/extend/plugins/regenerate-thumbnails/
As far as I know the images should always be scaled down and that behavior would be incredibly odd. It could be that the generated thumbnails are just incorrect for the theme uses and so the theme isn't able to render things correctly so give the plugin a try and see if that resolves the issue.
If not, you can send me a link to the site and I'll take a look at it live.
You can send the information to my email at DevinVinson (at) gmail.com. Make sure to include a link to this topic so that my spam filter doesn't grab it :)