Why do the textures look so smooth out and blurry ?

[)p(]

By default the internal filltering is set to medium. So all textures are filtered by the fe before going to the 3d card. This process can result in bluriness on some videocards.

If you have a good modern video card you can get much better results when you enable anisotropic filtering for you video card in your windows display settings.

And when you are there and you have a geforce 4 or similar also enable anti-alialiasing this will give the cab much better outlines, no more jaggies...

If you don't want to change these settings globally for your videocard then for most cards there will be toools available on the net to launch specific applications with custom settings for your video card.