Seems a high possibility given that the HUD elements appear to be scaled as well.
They'd need more memory. Given the memory savings from the lowered resolution, memory seems a rather tight commodity for them.
1024 upscaled to 1280 shouldn't be that blurry. Resolution is mainly an issue for objects in the distance, not up-close.
It wasn't better to use 1152x640p at this point? I'm pretty sure the gap was less evident with more proportional distribution of the pixels....