Save the image in Photoshop and use file>place to put the photo into
Hmm it's better but still not up to the quality I want.
Did you scale it in ID? What is the Effective PPI in the Info Panel when you select it?
Also, keep in mind that in Photoshop you are editing actual pixels on the screen, but in ID you are looking at a jpeg screen preview, so the quailty on screen may be lower due to downsampling and compression of the preview. This will not affect the output quality of placed images.
You can also change the way InDesign displays the image with View>Display Performance, where the default is Typical Display (low res), High Quality Display (better, but slower redraw) or Fast Display (gray outline of the image with no detail, but will scroll faster than typical). I usually leave it on Typical unless I need very precise placement of the image, and then I temporarily switch to High Quality, then back after the image is in position.