The problem is not in DragMath, MathType or any other editor that outputs code - the problem is that quality of bitmap images simply is worse than for example quality of vector graphics (svg) - or fonts - and png images usually look better than gifs. You can improve a little the quality of latex for screen or printing with various settings like gammacorrection and density (and scaling)...but pixels are pixels...and also your screen resolution and softening of fonts (in MathML) might have some influence...
One more interesting discussion about advantages and disadvantages of different output formats is also in http://moodle.org/mod/forum/discuss.php?d=130417