For the past few days I've had this problem. In SimPE I'm trying to make a food mesh by cloning the macaroni. For some odd reason, when I import the images they show up as pixelated in the database container. This is highly frustrating because I have no idea what's going on. I have had an upload to be "required changes" because of this over 3 times.

I will admit that I had to make the image smaller because I'm working with a 64x64 image. I'll show an example of what I'm seeing in SimPE

How are you importing the images? Are you using Build DTX? If not, you should. If you are using Build DTX, which format are you using? Do you have Sharpen set to None?

I'm importing png images and the format I'm using is DTX3. You mentioned something about sharpening. I'm not sure where you sharpen in SimPE.

It's one of the options when you import your image. The default is something else, but you want None.

You might also want to try a larger image and see whether it helps. 64 x 64 isn't that big and the image will be stretched if necessary. The image that you linked is closer to 256 x 256.