Your scaling setting for the portraits is way too high imo.
1,1 gives too much blur at the end ingame. I feef sad about it, because the template is perfect!
the F12 looks great (with this portrait I made butcher mode): Crisp, but ingame it's definitely blurry.
Test it yourself arcade Player 1.
Spoiler, click to toggle visibilty
A fix would be to set the scale to 0.25 0.25 for P1 and P2 big portraits but also all the others, in order to avoid extra blurr.
But it would mean rebuild the template and remake all the portraits already done.
Maybe you could think about it and the local coord issue and see if it's enough to release an update or something.