If you are running at 125% perhaps the pixel dimensions of your images are not equaling the pixels on your screen? If you can paste the HTML, CSS and one of the images here, I can try and dig into see why it may be displayed that way.
The most recent distortion I recall was caused by the image being taller than the line-height, and the code calculating the padding to account for the line height was resulting in negative padding. This looks like a different issue.
There of course was a change when we fixed rendering all non-font CSS dimensions as device-independent pixels on Windows and Linux instead of as device pixels. This is how OS X has always done it, since the OS takes care of the scaling. This is why I am guessing it is some sort of interplay between the scale (125%) and device pixels. I would imagine that the ST codebase should handle painting your image with interpolated pixels, but that is why the CSS, HTML and image would help. Otherwise I may find working examples that are just different than the non-working code you have.