Yes, of course you can. If stretching the art causes the quality to become unacceptable then just don't stretch it.
If stretching the art is for some reason necessary then you'll need to re-think your design to avoid the problem, either by eliminating the need to stretch it or by using larger artwork. It sounds to me like you might want your characters (or whatever you're placing into the editor) to be larger? If so, you will probably want larger source art rather than re-sizing it in the editor.
Trivia: the characters in the original Lemmings
video game were only 8x8 pixels.jbadams2012-03-29 22:23:57