steamapps\common\team fortress 2\bin\dxsupport.cfg
Search for "picmip" and locate Convar.mat_picmip under the 14 group and lower it to -1. (I am assuming you don't have an ancient video car with less than 256 MB of vram, in which case it would be group 12 or 13)
Would there have to be a refresh of some kind before this change would take effect? I changed it to -1 and loaded up hammer but everything was still blurry.