Hello, first of all thanks for the fast response.
I just woke up and checked Poweramp again and turns out all the album covers magically became better. I have absolutely no clue how this happened though. The only thing I'd done before sleeping is cleaning the cache of Poweramp (which I'd done before too to no avail), and removing all apps from the recent app list.
The album who's photo I'd shown still had this issue though. I changed its cover to a 3000x3000 cover using Musicolet, cleaned the Poweramp cache and ran a full rescan in Poweramp which solved the issue for this album too.
I had both of the settings on, and this issue seemed to be with all types of covers(embedded, downloaded, seperate files).
The issue with the artist images still remains though sadly. I have photos from the range of 200 KB to 28 MB and they all look lower quality than the original photo. Links to screenshots below as can't post in proper quality here. The original photo is in 4018x4018 resolution and its size is 10 MB
Google Photos app
Poweramp