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Seems like they did a mixed job with this Switch 2 Edition. There are instances of annoying flickering in certain objects and handheld mode is a blurry mess apparently due to a very bad upscaling solution that reminds me of those GBA filters to smooth the pixels:

https://packaged-media.redd.it/dn9ewvzdphkg1/pb/m2-res_480p.mp4?m=DASHPlaylist.mpd&v=1&e=1771610400&s=97f2675c78c4292e1f09ee384ac879ddc2a9cc19

https://www.reddit.com/r/Xenoblade_Chronicles/comments/1r974h6/straight_from_handheld_footage_of_the_switch_2/