Playing normally blurs the games a little because the new screen isn't bigger by a whole-number factor in terms of pixels... but it's not that bad.
Depending on the game, I switch between the two styles. 3D-style games like Spirit Tracks look better with the large screen, while pixel-part games like Castlevania look better with Start+Select. The games look great, but they look a bit smaller than the DSLite versions. It's very crisp, but small.