A low resolution version is being used for ease of editing. When you export your video, you should see a high quality result.
To get the best preview image quality at the expense of speed:
Personally, I use the "fastest" setting.
"Proxy editing, also known as offline editing, is a technique used in video editing to make large files more manageable.
You essentially create low-quality copies of your high-quality raw footage, then use those low-quality “proxy files” during the editing process. When you’re ready to export, you replace the proxy files with their corresponding raw files."
Thanks for all your advice on this, however even when I save in 4K it is still blurred, see pic , any other ideas?