I wonder if it has something to do with as the text is made smaller, it just naturally has fewer pixels to work with. For example, if I take this image below and simply make it smaller, such as 100x25, it gets blurred. There just are not enough pixels to make it smooth.
Themes
Boost: Compact logo in top nav bar is blurred
הדיון ננעל, כך שלא ניתן יותר להגיב אליו.