This is mainly because DALLE-2 generates at 64x64, then uses two separate upscalers to reach 256px then 1024px. The problem is that the upscalers are much less

This is mainly because DALLE-2 generates at 64x64, then uses two separate upscalers to reach 256px then 1024px. The problem is that the upscalers are much less capable than the main model, and each upscaling stage tends to compound the mistakes of the upstream image. I imagine DALLE-3 will generate at 256px directly, and use something like latent diffusion for a free upscale to 1024px. This should eliminate most of the high frequency artifacts.