And what effect does changing that has on the real Windows taskbar?

At that icon size (i.e; <=32x32 pixels) , the NextSTART retrieves tasklist icons from the windows themselves. By changing the size of the Caption buttons, you're probably changing the size of the windows titlebar icons as well, which results in the blurry icons.

Either way, you have 3 choices:

1. Change the Caption Button size back to default.
2. Personalize the NextSTART tasklist icons with your own icons (just drop an .ICO or .PNG file on top of the tasklist icon) so they're not affected by your changes.
3. Set the NextSTART tasklist to use icon sizes larger than 32x32, in which case it will retrieve the icons from the applications themselves, instead of their windows.

I had the taskbar hidden by WinStep so I didn't notice. The icons get smaller.

I understand, thanks for your explanation - I'll probably go with option 2.