Why should any resolution >1024x768 make the fonts look terrible? As long as you stick to 4:3 resolutions, everything is allright.
Of course setting a ultra high resolution on small monitors results in unreadable text. I have a 24" widescreen and am completely satisfied with the display of text using 1920x1080 resolution with FoV 1.33 . If you run that resolution on a 20" or a 22" you won't be able to read shit, obviously (yes, there's a huge difference between 22 and 24")
Another tip to greatly enhance level of graphics is using driver applications to force enhanced settings. E.g. I use nHancer (only works for nvidia, obviously) to enfore Supersampling 2x2 Antialiasing, Super transparency-AA, 16x AF as well as Ultra High quality texture filtering. This way I don't encounter ugly step-artifacts and it even helps to smooth out the distorted fonts greatly (have to use Supersampling or Combined, Multi actually makes the text worse).
Just a quick example I already had uploaded, too lazy to make a new screen. As you can see the font still is distorted, but due to nice filtering it still is easily readable. The "artifacts" around the text are not caused by game, they are due to JPEG compression.
http://img140.imageshack.us/img140/4834/takdorf.jpg
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