From the AGS manual:
QuoteNOTE: Currently, alpha blended sprites cannot be antialiased, so if you have the Anti Alias Sprites option turned on in Setup, it will not be applied to alpha-blended characters.
There is no such option in 3.2.1. Has it been removed and the manual is outdated, or did I miss something?
Yes, that's out of date. You can anti-alias alpha blended sprites in DX9, but not DX5 (I think).
I'm more interested in where I can enable anti-aliasing ;)
It's enabled by default, but you can disable it like this:
game.disable_antialiasing = 1;
Which is the opposite of what you want to do. So don't do that.