What cable are you using ? Is it a good one ? Is it shielded ?
Honestly, don’t give up just yet, if you say it looks better in passthroug AND that you like sharp pixels, then it means something is up with your setup.
If you feed 480p to your TV, your TV is going to try to “improve” the picture. From up close, you should see some pixels getting rounded and some “stair case” being smooth down. In 480p x2 (960p), you tv upscaling “improvements” shouldn’t be as bad and you should see almost perfectly square pixels.
If I were you, I would check the sampling options, here what it should be for a Pal Wii :
H.active: 640 in 4:3 mode,
720 in 16:9 mode,
H.samplerate: 858 for both 4:3 & 16:9 modes
Then use the “backporch” option to adjust the position of the picture, if needed.
Don’t give up yet, if your 480p looks better than your 960p, then it’s not normal. Have you any other 480p console to try ? Another cable ?
EDIT: and make sure your TV is set to “game mode”, de-activate all remaining post-processes etc. Try to find the “zero” value for the sharpness (it’s NOT necessarily zero…)