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I think you may also be confusing dpi and ppi.
Remember that you camera, computer and monitor have no concept of dots or inches. It is relatively common that compact cameras encode the 72ppi size into their jpeg processing algorithms. There are many theories as to why this is done, but the most commonly accepted one is that it automatically enlarges the size of the prints (it, of course, has no effect on the pixel by pixel dimensions).
Without seeing the images themselves its difficult to say if you're pushing the limits of the compact but 72dpi printing is relatively low resolution. You may be pushing the camera when you upsample to 300dpi.
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