That's because it's raster graphics that is rotating. It's impossible to avoid, the graphics will look sharp at the original angle and most blurry around 45/135/225/315 degrees. You don't notice it the same way when it's all animating and reacting to the wind. In theory I could sacrifice memory and gpu and use double resolution images, but that doesn't antialias that nicely instead when displayed smaller, and it'll appear too pixely. It's hard to find a perfect "in between" size and I'd rather pick the solution that gets the game done faster than worring about some slight blur.
And yes, they're smaller than hobbit sized