I was playing this game, which I though looked pretty damn good, when I noticed it was on the lowest resolution setting, and so I decided to put it up to my 1600x900 resolution and now its all pixelated and blurry, even on the highest settings, and I can't change it back.

No one can help?

I assume you dont have the second patch for the PC version? I believe this was addressed in that patch.

http://www.larian.com/dragonknightsaga_support.php

Yeah wrong game man, this is the atlus release of dragon knight saga on 360.  No resolution issues that I have seen either, in fact the game looks pretty darn good for the most part.