Taken from The Blender Game Reference, Section 25.3.4 “Available File Formats”
The height and width of textures should be to the power of 64 pixels (e.g. 64x64, 64x128, 128x64 etc.) or Blender has to scale them (in memory not on disk!) to provide OpenGL compatibility
Since 128 x 64 is not a power of 64, I assumed the words “to the power of” were a typo, and the words “a multiple of” were intended. It seems “64 pixels” was the real typo, and “2 pixels” was intended…
This is confirmed in the newer BGE 2.41 Material Docs in “Image Types” were it does say “power of 2” like you said, and that code you posted seems about as clear as can be. I had a texture in my Marble Labyrinth game at 1024 x 768, and it was kinda blurry at some angles. I set it to 512 x 512, and it’s 100% clearer and runs about 33% faster. Thanks for clarifying that for me. (accidental pun)