Think about it, scaling down from 500 x 500 (250,000) pixels to 128 x 128 (16,384) pixels throws away 90% of the image information. Might be OK with a simple image but anything complicated and interpolation makes the image blurry.
...but then, how are you viewing the scaled down 'icon' ? Zoom in and will look terrible, at normal size might look OK.
What you can try is setting interpolation to None in the Image -> Scale Image dialogue. That gives an image with "jagged edges" usually you try and avoid those. Up to you to decide.
For the 'icons' left side is 'NoHalo' interpolation , right side is 'None'
...but then, how are you viewing the scaled down 'icon' ? Zoom in and will look terrible, at normal size might look OK.
What you can try is setting interpolation to None in the Image -> Scale Image dialogue. That gives an image with "jagged edges" usually you try and avoid those. Up to you to decide.
For the 'icons' left side is 'NoHalo' interpolation , right side is 'None'