Several people have reported problems with iPhoto 5 making unwanted changes to pictures. Some have observed that there is some kind of Colorsync profile issue involved with encoding in pictures. Following that lead, I tried something. I'm somewhat color blind and most normal screens look bluish to me -- so I've taken to making my screens customized balanced to my eyes which others report as somewhat reddened.
I have had a strong form of the iPhoto 5 problem. So I tried resetting the color balance in the Display preferences back to defaults, and suddenly iPhoto 5 doesn't severely alter the color balance (or nearly as much). It still alters the picture when clicking Done, but the effect is far reduced and perhaps even good sometimes. However, if you change sharpness on a picture, that change is still lost.
Many of the general issues have been covered on a MacFixit thread, but I've seen no one offer any workaround. I agree it is a bug that Apple needs to fix, but this has left me in a workable, if not what I'm used to, using iPhoto to edit pictures.
[robg adds: I hadn't heard of this problem before, so I followed a test suggestion in the above-linked thread, with a slight change. I duplicated an image, then did four "Retouch" operations on the duplicate, saving after each retouch. I only clicked on one pixel with the Retouch brush (i.e. no dragging), so this should have only affected four pixels in my modified image (at least, that's how I understand Retouch from the help page). As you can see below, the modified image on the left has been dramatically lightened:

The histogram for each image is revealing, too. The wash out is plainly obvious when you compare the before and after histograms; there has been a pronounced shift to the right in the histogram.
I tried the fix suggested in this hint, but didn't notice any difference in how iPhoto modifies the images -- they were still getting unacceptably lightened whenever I edited them. So I then told iPhoto to use an external editor (Photoshop Elements 3) and repeated the experiment -- I used the blur tool to blur four very small areas of the image. As expected, the before and after images were basically identical, and the histograms were changed by only a pixel here and there.
Needless to say, I've now set iPhoto to use Elements as its editor, at least until Apple fixes this bug. I've also reverted all the edits I've done using iPhoto (select any number of images, then choose Photos -> Revert to Original), and I'll go back and use Elements to fix red eye, etc. in a whole bunch of images. According to something else I read, this problem only affects iPhoto5 in Tiger, not in Panther. Hence, I've marked this hint "Tiger only."]

