In their latest DF weekly they discussed how they sent questions to CDPR regarding the Switch 2 version and CDPR confirmed the game uses dynamic resolution scaling with 2x scaling with a version of DLSS. CDPR also confirmed the game targets 1080p in docked and 720p in handheld no matter if you use performance or quality mode.
This means the resolution can drop as low as 360p in handheld and 540p in docked play.
by Similar_Signaler