Simply put what I have posted here: http://stackoverflow.com/questions/15512326/wrong-title-bar-icon-size-in-adobe-air-on-wind ows/15534293
If I include16x16 and 32x32 size icons, it uses a resampled 32x32 icon scaled down for the title bar instead of using the 16x16 icon which would mean it wouldn't need to be resampled and look crisp/clean.
This definitely feels like a bug, haven't found any workarounds or solutions besides ONLY including a 16x16 icon file which forces it to be used but then the desktop icon is scaled UP which doesn't look great when you resample 16x16 to anything bigger.