The current theory regarding "why is all that resolution necessary?" is: there are tiny creatures swimming alongside the squid, which respond to a sperm whale's sonar by emitting a tiny amount of light. When the squid sees this light, it knows that a whale attack is imminent, and runs. (Well, jets.)
If the eyes were smaller then there wouldn't be enough resolution to make out the tiny dots of light emitted by those tiny creatures.
Another way of thinking about it is: the eye needed to evolve larger in proportion to how tiny the creature is. If the creatures were twice as big, then the eye would've evolved half as large as it currently is. (If the theory is true.)
Mathematically, there need to be enough retina cells such that "1 tiny creature at distance D can be detected per degree of viewing angle". E.g. if the squid has a 130deg field of view, and it needs to be able to see the creature light up within 1 foot of its eye, then it needs enough retina cells in order to scan the entire conic volume of the space between the eye point and "1 foot in front of the eye point". By the Nyquist frequency, that suggests there need to be at least two retina cells per "tiny creature body length projected from a distance of 1 foot". (The farther it is from the eye, the smaller its projection; and thus correspondingly more retina cells are required, which requires a physically larger eyeball. Note that as the eye gets larger, the field of view remains the same.)
To clarify: the squid isn't looking at the whale at all. Rather, the squid is looking at tiny sea creatures very close to its face that light up when hit by a whale's sonar. Thus they act as an early warning system for the squid.