High Res Texture pack Items have garbage on edges

When using a texture pack with items that render at higher than 16x16, the game is unable to render the 3d versions of that item properly. Examples include fancy Item drops, items in a frame, or items in your hand in first person.

Steps to reproduce:
1. Open Stick.png
2. Change the Image size to 32x32 using photoshop or similar. Save.
3. Open minecraft punch down a tree, breaking the wood down into sticks.
4. Place the stick in your hotbar as your active item and close the inventory.

When testing with an unusually high-res texture, it seems almost like it it trying to reproduce a 3d version with only 16 pixels, but this is uncertain.