Hello Robbo99j,
Thank you for posting in Apple Support communities. We understand that you purchased a new iPhone 12 and since transferring your data over you noticed that some photos are blurry and some will not load. We would love to provide you support on this.
Blurry photos mean that it is trying to load the full version from iCloud and may take a few seconds to do so.
This means that what you are experiencing is normal after transferring your data from an old phone to a new one. When transferring data some data may take longer than other data to fully transfer, and changing the photo optimization will not resolve it.
The best way to allow your device to fully transfer over the photos is to keep your phone plugged into its charger and connected to Wi-Fi and it will fully transfer your data.
This resource tells you about iCloud photos: Transfer photos and videos from your iPhone, iPad, or iPod touch
This section of the resource attached will tell you how iCloud photos work:
"Use iCloud Photos
iCloud Photos keeps your photos and videos safe, up to date, and available automatically on all of your Apple devices, on iCloud.com, and even your PC. When you use iCloud Photos, you don't need to import photos from one iCloud device to another. iCloud Photos always uploads and stores your original, full-resolution photos. You can keep full-resolution originals on each of your devices, or save space with device-optimized versions instead. Either way, you can download your originals whenever you need them. Any organizational changes or edits you make are always kept up to date across all your Apple devices. Learn how to set up and use iCloud Photos.
The photos and videos that you keep in iCloud Photos use your iCloud storage. Before you turn on iCloud Photos, make sure that you have enough space in iCloud to store your entire collection. You can see how much space you need and then upgrade your storage plan if necessary."
Thank you for allowing us to support you.
Have an awesome and productive day!