That's not quite how it works. If you apply a Gaussian blur on the scale of 20 cm to a 2 cm imaged object, it will persist in some form, if the contrast ratio is very high. That doesn't mean you have 2 cm resolution. Spatial resolution is rather different: it asks something more like, can you distinguish *two* objects at a 2 cm separation distance? Can you distinguish the case there two such separated objects, from that where there is only one?
That's closer to what you need to answer the question "how small text can be read?"
(Some of the visible stars in the sky, by the way, are ridiculously small (angular size) compared to the human eye resolution—there's no contradiction there either! The angular diameter of (for instance) Rigel is smaller than 1/10,000th the resolution of a human eye!)