Yes, I understand what you mean. It especially looks horrible zoomed in. At 100%, it should look fine. But there is a very big difference between how it looks in Illustrator and in Photoshop so I understand what you are saying.
That is exactly what the threshold adjustment does - it forces all shades to either black or white - no inbetween. So there is a fine line

that is the right adjustment - too far over and you have excessive noise, not far enough and you lose lines.
If you were to print it on a larger scale, you very well could see the pixeled edges because it is not vector based. However, I have printed calligraphy on canvases over 16x20 with no pixels showing, just smooth calligraphy lines

. But yes, no doubt, the potential is always there since it is indeed pixel based.
