Resize image in xaml without losing quality

Include RenderOptions.BitmapScalingMode="Fant" on your Image, like so:

<Image Grid.Row="1"
       Source="/MyProject;component/Images/happy.png"
       RenderOptions.BitmapScalingMode="Fant"
       Stretch="Fill"
       Width="64"
       Height="64"
       VerticalAlignment="Top"
       Margin="0,0,0,0"
       HorizontalAlignment="Center" />