Font rendering looks quite crappy in anything but exact 2x resolution doubling mode. I haven't looked into it, but suspect that subpixel rendering is disabled.
The only time I have ever seen any issue with scaling was whilst moving a 1 pixel horizontal line across the screen on the "highest resolution" setting, and that's only because I was looking for it.
What program were you using when you noticed the blur?
What I think happens: in modes other than 2x, text is rendered without subpixel rendering. It is scaled down, and possibly a slight sharpening effect is applied in the process. Anyway, the result is not as good as the awesome font rendering we are used to in OS X.
I figure that what it does it use the actual rendered pixel grid for subpixel calculations.
Instead of the normally very crisp rendering, you get this bloated/fuzzy look.