Well theres the problem....the texture is tiny in the first place. I dont even know if this size is even used in games anymore

Display and texture res are 2 different things. Try texture resolutions from 1024, 2048, 4096....you shouldnt even need to adjust the hardware texturing with these as the default is usually adequate enough and your renders will be fine.

Hardware texturing is purely for openGL display on the monitor, it has nothing to do with the final render

I had to ask what size you were using because your screen shot was so pixelated it had to be a small texture.

Jay