Advice on improving graphics for app for both iPad and iPhone

I am creating an app for both iPad and iPhone 4 and it looks terrible on the iPhone 4.

I have created the Flash File in Flash CS5.5 IDE with Movie Size 1024 x 768 and I am using the following AIR for IOS settings:

Rendering: CPU

Device: iPhone and iPad

Resolution: High

All my graphics are vector so I assumed that it would look crisp on both devices. It is not as perfect looking on the iPad as it appears on my PC monitor but I can live with it. I can't however live with the iPhone 4 appearance.

I am therefore seeking advice on how to improve the iPhone 4 appearance.

As far as I am aware, there is not a way to use 2 sets of graphics, one for each device. Please correct me if this is wrong and it would offer me a solution.

Would doing all the graphics as PNG be a solution?

Btw I am using AIR 3.2 SDK if that has any relevance and my graphics are static.

Thanks in advance.