Mosiac attempts to pick the sharpest photo(s) for each face or set of faces to give the sharpest and most accurate result. Average does a nice job but tends to be softer.
If I'm not mistaken, the main requirement for getting good results with mosiac is to always have the focal point be in the center of the image, and to be careful to discard anything that's out of focus so it doesn't get picked for the texture.
I don't care for the sharpening artifacts on Mosiac either, though I'm really thankful for the new ghosting filter.