Well, it's visible that the pixels are bigger than they should be. If you zoom the picture up a bit, it becomes pretty clear. No, no one is expecting 1280x720, but Vita's native resolution is 960x544, and it's not unreasonable to expect a PS2 game port to run in that res.
That said, this will look so much better on Vita's screen than it does on a monitor, due to higher pixel density, see Uncharted for an example of this.
448p on PS2, and you're fairly right otherwise... I quickly pixel counted resolution here to be 720x448 (remember, this is 16:9, PS2 version was 4:3).