The external monitor will be "blurry" because it's running at the wrong display resolution for that size of screen which is most likely larger than your laptop screen.
The display resolution (which is a Windows setting) is currently set for the size of the laptop screen.
I don't know why you can't extend the display though, I'm not clued up on that as I've never needed to use that feature.
When I use an external monitor on a laptop I don't use the laptop screen at all.