Showcase doesn't generate the thumbnails, the XenForo Attachment System does.
What do you have the 'Attachment thumbnail dimensions' (an core XF attachments option) set to? If its less than 150, that could be the cause of it.
The List View layout does have MIN and MAX height/Width CSS that might be effecting it (I will have RUSS from Pixel Exit take a look at it to see if there is any CSS that is in play that is distorting the display somehow).
Side note: Have you tried any of the other layout types to see if those work better for you? (altho, most of them are grid type layouts that CROP the full size image, so a TALL image like you are using is going to look terrible).
The List View container is expecting a larger thumbnail (the cover image element is 110px wide). Pretty sure that Russ and I can make some tweaks to List View layout, however, the tweaks would make that particular thumbnail display in its intrinsic size, which is really small (and would be extremely small on narrow responsive).
I have thumbnails at my demo site generated a bit larger (150) and it looks much less pixalated here: Test Category I Still not perfect, but much better.