BloomingLilac: I haven't been able to play the game because my screen looks like a car windshield in a heavy rain without wipers. I've tried all the tips I've read on the forums, but nothing helps. What could be causing this? Thanks in advance for any replies.

Hickory: Check your graphics card control panel, and if it has Morphological Filtering enabled for Arcanum, disable it. Also, some people say that having CrossfireX enabled causes bluring, so check that.

BloomingLilac: I'm not familiar with CrossfireX. Where should I check? Morphological Filtering was already disabled.

cognatus: I have a problem with blurred text as well. This happens right from the "pick/create character" wizard.

Note: It seems that when I click the mouse, any text that updated becomes slightly more legible, but with each pixel I move the mouse, the text becomes less legible, gradually, before bottoming out at "totally blurry" if I move the cursor something like 15 pixels. I seems that the entire screen reapplies some kind of blur filtering every time it is "updated" - that is, every time the cusor moves.

UPDATE: Dear traveller from the future... I found a solution! In the end, renaming ddraw.dll solved it. The text is absolutely clear. Seems like there was some sort of antialiasing problem.
FWIW, my specs are Windows 7, a Geforce GXT 760 running the 337.50 drivers and an Intel Core 2 Quad Q9505 on an ASUS P5K-SE with 3GB RAM.
By the way, I also tried compatibility mode, altering a bunch of different command-line options, and going through the GPU control panel to search for and/or disable Morphological Filtering, but found no such option.