You say you've "uploaded" the emoticon but the image URL is pointing to imgur!?
Anyways, the original image you're linking to is pixelated at its native resolution of 64 x 60:
There's not much you can do about that other than to use another, better image.
And since this is a single image, there's no point in using CSS sprites, which you haven't enabled btw, so the dimension settings you've defined (22 x 22) are being ignored. Note, the dimension settings here are not for scaling, but for cropping.