Nikon D70S fuzzy and or grainy faces

I've been taking group photographs with the buisness logo or signs in the background. If they are taken inside, I go to the M on the dial and set at 125 and 6.3 while using the Nikon speedlight SB-800 on a TTL setting. These are the settings I use to get good quality class groups (school). Image quality is set to jpeg fine and Exposure compensation is set for -0.3. When I do an outside photo, I switch to auto and let the camera choose. I sometimes get a highlight msg on the LCD screen, but it is only on the brighter parts of the photo ( ie. sky) and very small regions. I'm trying to get photos for a magazine and wonder how I can get better quality?