Make sure that you've set both Paused and Playback Resolution to Full; right-click the Source Monitor and the Program Monitor to set these (independent settings for each monitor).
I did indeed have those set to Full.
I'm actually now able to get them appearing sharp in the sequence monitor, though oddly when I click to select the monitor pane the image blurs again. Output is still quite blurry (tried many many formats and settings).
Have tried various other permutations in project setup and output - still no luck.
I'm wondering if a clue is the behavior of the program monitor - the clip displays clearly in it until I 'select' the video screen, at which point it blurs just like the output. If I click another area of the screen again, the image resharpens, and so forth. Anyone know what mechanism is causing that?