That screenshot is from a cinematic in-game. As stated, cinematic scenes use high resolution textures because we have control over how many characters are rendered on-screen at once. This is how the game was always intended to look in cinematics. We did not 'remove' high resolution textures - they were always in the game for use in cinematics.
With that said, thank you for all of your responses. We understand everyone's desires around this issue, and although it's not going to be an overnight fix, as mentioned we're working on addressing this. Many of the suggestions you have made are similar to potential changes the development team is investigating.
I rounded up the development team once more and had another discussion, and wanted to update you with a better timeline and some more precise details on what we're doing right now.
The first major changes will be in our next major Game Update, which will have the version number of 1.2. Those changes will bring greater visual fidelity to your character and those around you, but will still allow for good performance in situations where a lot of characters are on-screen at once. In other words, for those screenshots of your character in their best gear, you should see a marked improvement.
Other potential changes are being discussed right now – as I said, many of which are similar to changes suggested by many of you. As usual, you’ll see these sorts of changes on our Public Test Server before they make it into the live game. Right now we cannot commit to a live date for the 1.2 Game Update, but it will be within Q1 2012.
Thank you for the update.