The texture is 2048x2048. On the UV map screen, it looks as good as it did in Photoshop. But in 3D mode, it looks ****e. I did also maxmize the space allocated to the ship's faces on the UV map, should have mentioned that.
Water: As far as unwrapping goes, is there any other way to unwrap in Blender other than UKEY - UNWRAP on the UV screen?
Yes you can tell Blender exactly how you want it unwrapped.
Switch from object mode to UV Face Select mode.
Alt + right click - will allow you to place a seam.
Place a seam around an area you want to keep together. Think in terms of unfolding.
In the UV Calculation tab
Use Conformal for boxy - tech type objects.
Use Angle Based for more organic shapes.
Then hit U
I unwrap in pieces
Use a texture with check patterns to look for distortions.
I use several - 2x2 check pattern up to 64x46 (1024)
It only unwraps the faces you have selected. This allows you to move on to the next part (just move it out of the way) Once everything has been checked for distortion, select everything and unwrap again. This will get everything the same size.
There is more - like pinning and unwraping from view - but first get familiar with seams.
will look into the blurry issue