Having poked through the game's files a fair bit, my personal opinion is that this is the mobile port of the game, with the Xbox UI, for some reason, ham-fisted into it. Here's why I think that:
folder in override titled "xbox_gui"
Weird decomp of the dialog.tlk file, with a path that implies it comes from the IOS codebase.
The folder structure in general is also very similar to the Android port.
I still have no idea why they used the Xbox GUI at all, seeing as the mobile port had a perfectly functional UI, but I assume it was partially due to the fixed resolution nature of the Switch, as opposed to mobile phones which have a wide range of resolutions and aspect ratios.
As you said, the textures are definitely some sort of AI upscale, that much I'm certain of.
I can confirm that the base textures are actually the PC 512x512 textures, however, they have been upscaled to a staggering 1024x1024, which is why they look so bad. See below:
Left is the original texture in \TexturePacks\ and right is in \override\Textures.
In the description, my confusion was more regarding why they included this without even advertising it, rather than confusion about why it looked so bad, which I think is what you're getting at?
Thank you for sharing, hope this is helpful info, or at least, interesting.