This started at least in build 1548.
Steps to replicate:
  1. Open VRChat graphics settings
  2. Change to a lower or higher preset.
Some avatar textures will become extremely blurry when changing the graphics preset to a higher or lower preset. No other graphics settings cause this. I have not found this to be affecting world textures.
Changing back to the original preset the game was launched with will fix the blurriness, but you cannot use another preset properly unless you fully restart the game, as the issue persists when changing/rejoining worlds.
Tested GPU: NVIDIA RTX 2070 Super
Tested driver versions: 566.03, 566.14
I also had a friend replicate this with an NVIDIA RTX 3080 Ti.
For easy replication, here is a public avatar where the effects can be seen. The blue on the dress should become blurry.