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Have you got pixelation turned up?
If this was quake, the render command would be "gl_nearest_mipmap_nearest"
It should not be using mipmaps AT ALL in a fake software renderer with low res textures, let alone bilnear LOD. The lack of anti-aliasing also makes all imperfections stick out more.
I don't know if you can fix this by editing the Engine.ini, but if you can this would be really useful information to report. Also, I would recommend using ReShade to enable FXAA / SMAA.
99% of fake Retro games, game devs do not care and ignore requests to fix graphic issues, or are outright hostile to people reporting them. "It's not a bug, it's a feature."
Unreal Engine itself has problems with rendering pixel graphics mode. A lot of problems are built directly into the engine. It's also the worst performing engine for retro games, with heavy CPU/GPU performance hit that don't make sense for the graphics. Modern systems won't notice, but you will on a steam deck or anything slower.
edit:
AFAIK, the user can't manually fix texture filtering. This is set in the unreal editor texture mode. So the game devs likely have bad defaults set for texture filtering.
I don't know if this will help, but maybe editing the engine.ini, add:
[SystemSettings]
r.FullScreenMode=1
r.MaxAnisotropy=16
r.DefaultFeature.AntiAliasing=1
r.PostProcessAAQuality=4
r.MipMapLodBias=-1
I am not experienced with tweaking UE4, so use at your discretion.