I want to do a mail merge and post out a letter to members of a Civigroup. You can do this by generating a message template. When you insert a letterhead image into the template, the image resolution on the printed copy is poor. Is there a way to improve the resolution so that it looks professional. I presume this would be the same with invoices etc.
Meanwhile, there is a new extension called CiviOffice. It is still under development but provides many features already and should be able to solve the image problem described in your question. Have a look at the documentation: https://docs.civicrm.org/civioffice/en/latest/
If the printed version looks poor it is probably due to the quality of the image you used in the editor. You could simply upload one with better quality / resolution.
In general you may have to fiddle a bit to get your html templates work well. I would advise to use an external editor and backup your templates once they work.