using different display adapters wouldn't be likely to cause this issue. it wouldn't change graphic detail settings, or change what settings the game uses. worse case scenario, it would just decrease your framerate. (only real exception here would be version levels. so if the iGPU only support up to DX10, but the game wanted to use DX11 by default, then that could cause a loss in graphical deatil. same for like shader version too.)
with that being said... only thing i can think of is either a resolution issue, or desktop DPI scaling.
you seem to have already touched on the resolution part. i would look at DPI next. if you are using desktop DPI scaling... it is from | right click desktop > display settings > that percentile under scale and layout. if set to anything other than 100%, you would just right click pso2.exe and set the option for it to "Application" from the compatibility tab.
other than that, i can only think of anistropic filtering. it shouldn't cause such a severe issue, but that might depend on your resolution. personally? i haven't been able to get the game to look good past 1920x1080.
EDIT : for the anistropic filtering... the game doesn't have an option for this and isn't used by default. you will have to enable it through your graphics control panel.
well... i can't think of anything else that would cause the game to appear blurry or pixelated. sorry, and good luck!
THANK YOU SO MUCH, DPI was my issue and now the game looks great!