It is not as sharp as it could be, and someone on this site once commented that he notices the difference (between Mac and Windows, where the software doesn't introduce blurriness) even on his 4K monitor.
(You could ask me why if I hate blurriness so much, why am I still using a 1080p monitor. My answer is my high-DPI monitor is coming soon.)
Sounds more like personal preference than something objective. Windows’ 1.5 scaling on the same monitor looks pretty bad to me (font hinting in particular, legibility isn’t great).
I chose not to scale windows but to deliberately go lower screen resolution on my 4K monitor and aliasing is minimal, almost unnoticeable. Great for coding. For gaming though, I switch back to native 4K resolution. All this while windows' software scaling remains 1:1.
Although I've used the "Display" tab of the "System" pane of the Settings app in Windows 10 to change the scaling factor (labeled as "Scale and Layout"), I cannot make sense of your comment.
Every time I tried to scale windows UI in "software" way, as you just described it, I would encounter bug after bug after bug either in windows or apps or taskbar. After a realization that windows will never get UI scaling right, I decided to do "hardware" scaling, meaning, I still keep my windows scaling at 100%(recommended), but then I set the display resolution to a compatible lower one. My monitor is 38" and it's native resolution is 3840x1600. But when I set that resolution, there is no way in hell I would be able to read the fonts of the screen. So, instead, I set my resolution to 2560x1080, which doesn't look blurry, scales perfectly, and zero UI bugs.
(You could ask me why if I hate blurriness so much, why am I still using a 1080p monitor. My answer is my high-DPI monitor is coming soon.)