Try disabling temporal AA or FXAA.

Thank you for the reply.

I've tried both versions of AA and turned it off all together. Still happening. Only to character models though; environment and prop models are fine.

That's a doozy. As in brain-twister. Possibly a setting in driver settings? Just a thought. But I wish you luck.

One last thought: Is there a an 'Ambient Occlusion' setting to disable?

Ambient Occlusion, disabled or enabled, doesn't fix the problem. It's still there.

Ok. Best of luck.

Heya. I'm having what sounds like the exact same problem. Right after I create my character, Nora has a pixelated blurry outline, but everything else in the game looks fine. It's the same for the robot down the hall, so I assume all game characters have this problem. I've noticed that it only happens when I'm close to a character. The further I move away, the sharper and crisper their outline gets. I've also made a thread about it on the Steam forums, including screenshots. I would post the link, but apparently posting links is blocked.

Anyway, I've tried toying with some of the above mentioned settings, disabling one at a time: Antialiasing, Anisotropic Filtering, Ambient Occlusion, Godrays (launcher forces back to low quality when you exit, so not sure if I fully disabled it), and Depth of Field (low setting, haven't messed with the ini files much yet). None of them made any difference. Not sure what to try next. You mentioned having an AMD Radeon HD 7670M. I'm using an AMD card too. Are you using RadeonPro by chance? I'm probably grabbing at straws, but I'm wondering if it's default profile is breaking a setting or something.

Edit:

Ok, I've found a fix, at least on my end. I've all but confirmed that the problem is an incompatiblity with Godrays, and a bug in the launcher not allowing you to disable them. I kept testing different graphics configurations, and finally noticed that if I select the Low graphics preset, the problem goes away completely. I also noticed that when the Low preset is selected, Godrays are disabled and stay disabled, unlike the other presets where if you try to disable godrays, it reverts back to low as soon as you hit OK. I don't know if this is a bug in the launcher or intentional. Either way, to fix the problem, I selected the Low graphics preset, then manually set all the settings and sliders back to where they were with the High preset, EXCEPT for Godrays, leaving them disabled. Went into the game, and no more blur! I decided to fool around with the settings some more afterwards, to confirm that it was indeed Godrays. And sure enough, with no other settings touched, if I turn godrays back on (even on low), the blur came back.

TL;DR: Here's the fix, short version. Open launcher options, take note of your current graphics settings, then select the Low graphics preset to force disable Godrays. Leaving Godrays disabled (don't even touch it), manually change the rest of the settings back to what you had previously; I personally just reused the default High settings. Test your game and see if the problem is resolved. Eat some cake in celebration. Hope this helps.

No I don't have pro haha.

But that's exactly the problem I was having. I had a feeling it had something to do with Godrays because it only ever happened whenever you were outside in the wastes while the sun was up, and it disappeared at night or when inside a building. And as you said, it would always revert back to low after disabling it.

I'm going to try your fix now! Thank you!

I guess you missed my post from yesterday which explains exactly what the issue is: http://www.gamesas.com/topic/1544052-graphical-artifact-with-godrays-enabled/

My solution is the same as Mechanos, for now. Definitely seems to be an imcompatibility with some of the Radeon HD XXXX GPU's.

i had the exact same problem amd gpu, fking annoying, that volumetric lighting one of the big features that make the game look decent and creates atmohpere is fking broken. nice.

Ah no, I didn't see that one, sorry. But yeah, the blocky pixel mess is gone now after doing what Mechanos suggested. Definitely must be an incompatibility.

This is not compatibility issues, happens on NVidia cards too. Simply bad coding.

Are you getting this issue on an Nvidia card? So far everyone has had a Radeon HD.