What I was referring to was the "Metrics Inspector" where you can select and group elements; then adjust the grouped elements size in the "Metrics Inspector" to "54%".
This way we can begin to establish where the pixelation is occurring. If it looks OK in the Hype "Preview" then most likely it is a "Coverage" issue. Please note that You should also preview in different browsers (Safari, Firefox,Chrome, Opera, etc.) to cover that variable as well.
If it does not look OK in Hype's "Preview" mode (once You account for any browser variation) then make sure "Position with CSS left/top" is unchecked in the "Document Inspector". If it is unchecked, then try unchecking "Use WebKit graphics acceleration" to see if that makes a difference.
If that does not help then...
The real litmus test - what do your images look like in Photoshop at 54%?
If they look good - maybe consider redoing the page with the working scale of the page at 54% of your normal 768 x 1024. And have Photoshop (or whatever image editor) scale the images to 54% and work from there.