That's because the n64 roms store only low-resolution images (tv's don't have a high resolution), there's nothing you could do about that except using a filter to increase the resolution of the textures at load time (say, double each textures width and height) - kind of what the snes emulators are doing. But I know no gfx plugin that does that. However, a filter will never give you as decent results as repainting the textures by hand, and that's what's happening in the "High resolutions texture project" subthread in the pj64 forum, so you might want to visit that forum.
edit: uhm, the 1964 forum, not pj64. sorry.