So after playing around with different video sizes I discovered that when uploading the video to webflow it was compressing it during the transcoding process and then stretching it back out as @Siton_Systems was saying in the post above. As far as I can tell there is no way to prevent this loss of quality when uploading to webflow regardless of the actual video size, so I started to explore different options.
Turns out, you can upload videos to Dropbox and use it as a host for the video. You can then use the video link from the Dropbox file and put it in an HTML5 video embed. This method causes no loss in quality and you can size it much easier than a background video element anyway.
With that being said I would love to see Webflow build in a feature that lets us upload videos directly as assets because this is a rather tedious workaround but it does at least work.