I'm assuming this has something to do with the baked image being too small (but it's 2048), but I'm getting this weird blurring in spots (not to mention, the whole texture is a little blurry up-close). Any idea how to fix?
"Diffuse" blurry is caused by the texture resolution, but the long stipes of blur are probably caused by the bake advanced settings.
After the texture is baked, Blender apply a margin on the UV island edges. From the manual page:
Baked result is extended this many pixels beyond the border of each UV “island,” to soften seams in the texture.
Inside the orangish area you can see the texture, outside it the margin. The blurring effect is probably caused by the interpolation between pixel color that occours during the boundary extension.
Margins are not bad. They are useful to hide the seams; problems occour when they overlap with the islands in the neighborhood.
Try to lower the margin size or increase the space between the UV islands to avoid overlapping in the baked images.
Depending on the size of your object and how close the camera is to it, 2048 may actually be very small for an image with this kind of detail. The blurred lines on the baked image look like they might be caused by an issue with the image you originally textured from - It might be worth going back to the original blend to check the texturing and tiling.
Hope this has been helpful - my bad if not :)