Digital zoom is kind of tricky.
There are really two ways of doing digital zoom. The most common way is to just have the video player stretch the final output to render it larger on-screen. This is what
Blue Iris and/or UI3 will do if you zoom with the mouse wheel. You can improve it somewhat by going completely overboard on the bit rate in your main stream, as it preserves more of the fine pixel-level detail.
The other method, which I have only seen implemented in some PTZ cameras, is where the digital zooming occurs in the camera
before the video is compressed. What actually happens is you enable digital zoom, then zoom in with the regular PTZ controls. Once the optical zoom reaches its physical limit, the camera will seamlessly transition to digital zoom. This actually yields a substantial improvement in detail capture because the compression artifacts have a much lesser negative effect on image quality.