Well, it was As Designed then, and it still is.
There aren't many approaches to handling media being uploaded which is smaller than the thumbnail size. The approaches that exist, none of them are particularly elegant. Stretching, padding, both are pretty ugly approaches.
A media gallery really isn't designed for storing icons. A few work arounds would be making the thumbnails smaller (I've seen people go with 100 x 100 thumbnails with little to no information in the thumbnail) or not permitting small images in your gallery (which would require active moderation to deal with).
At this point, posting a suggestion with how you think it would be best handled would be most appropriate.