Hello Jim,
There is no down-sampling of terrain textures in CityEngine. Higher-End graphics hardware should be able to hold textures in the size of the original resolution. Could it be that 214 x 150 is the resolution of the DEM?
Regarding the washed out look of the texture, could it be that the Aerial.tif is sampled in 16 bit? CityEngine simply maps such terrain textures down to 8bit. So as a best practice, one creates first an contrast enhanced 8bit image from 16 bit high dynamic range images.