The game itself should render at 64x64. Look at how the flamethrower remains smooth when rotated, that's not possible at 64x64 without distorting the sprite. I mean how big is the flamethrower, like 16x5? Here's how it woul look like rotated by circa 45 degrees. I've made the images in paint.net so results might vary but to give you an idea it should be fine.
upscaled to 256x256
In other words your game has an anti-aliasing like effect that can't be achieved at 64x64