Downsapled and blurred image
Have you fftshifted your results or not? The answers will be different: 

If you fftshift your $256$ x $256$ 2-dimensional Fourier transform result, retain only the $64$ x $64 $ central co-efficients, inverse fftshift, and then inverse fourier transform the result, the effect will be a blurring of your original image. 

This is because you have culled our your images' high frequency components, hence, the effect will be a blurring. 

If however you have not fftshifted, then you are doing the opposite, and will actually be doing a high pass filtering. (Your image will certainly not be blurred).

By the way, hard thresholding fourier co-efficients like this is certainly used, but will give you ringing effects. However, those effects might be negligible and/or removable based on your application.