The CGI wasn't rendered in that high of a resolution because they were using Amigas, and they figured it would be easier to re-render the CGI in whatever higher resolution became the standard down the line. No one expected the master files to be lost.
The master files were lost? What's the story behind that?
Does this mean Babylon 5 will never be released on Blu-Ray since it will be too costly to redo all the CGI?
Exactly what I said: Warner Bros. lost the original CGI master files. The Lost Tales
used fan-made models for the CGI.
It's possible that someone will go back, re-scan all of the Babylon 5
footage, remaster the episodes, and redo all the CGI and it would be glorious. But it's more likely that I will be the first man on Mars.