The resolution of the background didn't change between 1.0 and the present. V3.0 will have a much higher-resolution background.
Are you saying that when you run both versions with your current setup (and screen resolution), 1.1 is smooth and 2.6 is pixilated? 1.1 did not have a widescreen setting, so the 1024x768 background would be stretched horizontally.
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