When it's in the distance, I agree it's an artistic choice and it's fine.
But it's sometime also applied on nearest objects.
That's why I think they are using this artistic renderer to mask the fact the textures are not very detailed.
Sometime the textures are even made of mosaics, like the grass.
Maybe the auto-downscale is used to create this mosaic effect.
Did you try replacing with an image size multiple of the current one?
Everything in front of link and in the distance is processed.
Keeps the focus on the personage.
Matter of taste but in my opinion it looks like crap.
Very undetailed.
I'd take WindWaker anytime instead of this. But it's still a great game.