Sounds like more of a game problem. The screen is about 200dpi which is pretty good. As more games test on the deck that should improve.
I tried playing some steam board games on there, the text is readable but on a small screen it's not a good experience. It worked well with an external screen.
It's a tradeoff between cost, performance, portability, battery life and resolution. They've done a nice job in my opinion.
There will be too many objects on screen. When u shrink it to 720p, it's simply not viable anymore as the objects and textures have too few pixels to represent.