I was taking a look at this texture wibbling earlier when running around Limsa. I don't think it's mipmapping, it's sort of a 'level of detail' distance. Basically, your 'background drawing quality' option in config works on a scale, as it goes up, it draws the detailed textures for a longer or shorter distance, depending on what you have it set to.

But not just in a 'up to 500m is detail, then out of 500m is less detail' way, it sort of happens in multiple jumps. So say you have it set to standard. For 500 yards you'll have +3 detail, then from 500-1000 yards you'll have +2 detail, then 1000-maximum view distance is +1, which is really pixelated. This gives the illusion of having some giant invisible bubbles around your character, and when things enter those bubble their textures improve untill eventually they get close enough to be drawn in optimal quality.

I think if you could set the detail higher than what the config offers you'd probably be hit with some pretty serious graphical lag, so untill the games engine is tweaked for optimal performance, this is what you'll have to live with.

If it's really that bad turn on 'depth of field', that fuzzes everything out of focus from certain distances and stops the 'texture bubbles' being so noticable. It also chews up a bit of processer so don't be surprised if the games frame-rate nosedives when you turn it on