You've run over the diffraction limit. Light rays passing through a small hole will diverge and interfere with each other and a pattern emerges--a sort of banding where different frequencies/placement can cause separate rays to add up or negate each other. The smaller the opening gets, the larger this divergence/interference becomes. This pattern is called an Airy disk. When the diameter of the Airy disk's peak gets larger than the size of a pixel and the Airy disks for each pixel begin to merge, you get softness--so the higher the pixel count of your sensor and the smaller your sensor, the sooner you'll see it as you stop down.

You're generally sharper at a "happy medium". Where your gear's "happy medium" can be will change depending on the pixel density/size and lens design. With APS-C-sized sensors, which I cleverly detect you are using from the 17-85 lens reference, you probably don't want to be going over f/11 without a really good reason and a willingness to give up some sharpness. Theoretical diffraction limits will probably be in the f/5.6-f/8 range. You'll also want to find out where your lens's "sweet spot" is--many lenses perform better stopped down 1-2 stops from wide open. For example, the EF 50mm f/1.8 II's "sweet spot" is in the f/4-5.6 range.

I would also say, judging sharpness at 200% magnification is just asking for all your lenses to look like dogmeat. That's not a realistic magnification in terms of viewing distances you'd have from a typical print, and it's a rare lens that's going to stand up to that kind of test, even when used at its sweet spot. Stop pixel-peeping. Start looking at the print.

See also: http://www.cambridgeincolour.com/tutorials/diffraction-photography.htm