Software renderers usually drop precision of various things to greatly reduce the computational demands. Texture filtering quality, for example, often takes a big dive.
To take a big dive from N64's texture filtering quality you'd need to start digging.
There was a breakthrough in the last few days - check the ps2dev forums, if you are interested. IronPeter, who seems to be spearheading the effort, has managed to draw a triangle through RSX. Pray for his safety from the Sony ninjas