You can choose between... Pixelation and resolution... and yeap, those are technical terms.
obscured due to insufficient resolution or (relatively) super-sufficient digital-zoom ratio
That sounds nice.
The diffraction limit. is a physical phenomenon also present in digital images, as you said to some optical limitations on the lens, it is not by an analog substrate receiving the image, but how it is produced. So it could be also present in a digital photo.
"Diffraction limit" could be present by using a low aperture, for example, an f22 on some type of lenses.
There could also be some limitations on the quality of the lens itself producing less resolution than the digital sensor can receive, by either producing some aberrations or simply by lack of focus.
When these flaws are introduced "artificially" on an already produced photo, normally are generated by a resampling of the image.
You have two options, either resampling by just copying information from adjacent pixels (nearest neighbor) or by interpolating the information to smooth the jagged borders produced by the former.
A digital zoom takes the information of the image and tries to interpolate it to smooth the information when enlarging it. But there is not much you can do about it but try to apply some sharpening (or deblur) algorithm. http://smartdeblur.net/
If you are not enlarging the image, you are reducing it. In that case, yes, you simply have a lower resolution image, and you can ask for a higher resolution one.
Another type of blur can be artificially added, like some gaussian blur, and or pixelation, to intentionally obscure some data.
But in your case, it seems that the only options are "pixelation" or "resolution".