The image file I downloaded is blurry, this isn't intended right? I mean, I would expect to see clear pixel art, but right now the pixels are blending together and making some things really hard to see
Yes, it is not intended. Pixel perfect precision is ideal. It downloads at the proper resolution on the devices I've tried it on. And itch shouldn't be compressing anything.
Many image editors and image viewers (such as most default ones) automatically smooth over images, making small pixel work blurry. Any good image editor should have an option to override this. I believe it is called anti-aliasing.
For pixel perfect editing, Paint.net has worked well for me. But anything other than the default image viewer should have the option to remove the blurry effect.