When you import a texture that is low resolution (such as pixel art) if you attempt to use it in a UMG image, the filter that you have applied to that texture is not inherited. This causes the images to appear blurry. However, converting the texture over to a material causes it to appear as crisp as it does in the texture preview.
Found in 4.10.1. Reproduced in 4.9.2 binary and Main CL 2811183
Attached a sample texture to use in reproducing the issue.
1. Open the Editor
2. Import the attached texture
3. Open the texture editor
4. Set the Filter to Nearest
5. Save the texture
6. Create a new widget blueprint
7. Drag an image onto the canvas panel
8. Set the Brush Image as the new texture that you just imported
Result: The texture appears blurry even though it was crisp in the texture editor
Expected: The image would inherit the texture's filter, and it would appear as it does in the texture editor.
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