Yes, that's what it is supposed to do. Mip mapping "blurs" in the distance to prevent texture aliasing (shimmering etc.). It shows ugly banding between the mip map levels. To get rid of this, enable Config.glTrilinear=true in addition. If you still don't like it that way...well, then don't enable it but it's there for a reason. Most people prefer the slightly blurry but stable look.