I finally got this to work. I was fooled by the fact that the slider doesn’t seem to take effect immediately. I’m still using 3.5 server in this case but the latest windows client. I have Display>Resize remote screen on and Change Settings>Disable multi-pass display encoding checked, the Quality slider all the way up, then I resized the window and it looks fine.
I did play a little with Version 4 server (workstation) and will probably be using that on some other machines after I talk my boss into paying for it. It seemed to work better out of the box but I don’t really know yet.