Strange that I've never noticed the palm fronds looking like they got chewed up by giant bugs.
You can do only so much with a limited number of pixels and when you're racing around you don't spend too much time looking at the trees.
These are the kind of palm trees that have thin bristly like leaves.
I heard that they actually traveled to various locations, and took photos of the landscape, objects, and cars.. for use in the game.
When you digitize things on such a low resolution... the sunlight peering through the leaves would have been represented by what appear to be holes. There wasnt enough resolution to represent the thin stringy quality of the individual leaves.. and doing so with completely solid graphics.. may have looked far too unrealistic.
Do remember also... that the games look is far changes when seeing it through a real arcade CRT. The shadowmask lines created a texture effect, and hid a lot of the artifact look that you see here. Further CRT defocus, shadow-mask light leaking (color blending), glow, and not being fully convergent (all color guns aligned).. also helped to smooth out the image.
Thats why Outrun still looks great even today. The graphics are more like an interpretive Oil-Painting. Resolution isnt as important as Composition, Color, Shading, and Contrast.