Originally posted by Mharr:

In theory you could generate a high res texture pack using whatever filters you want.

That's not how filtering works[en.wikipedia.org]. It's when your GPU uses the fractional parts of the texture coordinates to interpolate between pixels - for the most basic filtering bilinear[en.wikipedia.org], if you had a black pixel next to a white pixel, then everything in between the exact centres of those pixels is a gradient of grey.

Almost every game made this century offers this because it takes no effort, the GPU does it automatically, when you supply a shader or texture (depends on what API you use), you have to supply a filtering mode (a single variable) - Valheim just chose to only supply the ugliest one - sure it's also the fastest, but not by much. All they need to do is add an option to supply the "trilinear" or "anisotropic" mode. In most game code that's about 10 lines worth or less.