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The 2 patches that solve this issue are:
907f8c5d3347eef95ecb6eccc7c5752093c7f5cf
c2046a2992b04fde2286c6feffdd7f4410087583

I can reproduce it with virt-viewer-2.0-6.el7.x86_64.

# rpm -q virt-viewer
virt-viewer-2.0-6.el7.x86_64

Then updated virt-viewer to latest virt-viewer-2.0-7.el7.x86_64 and verified with below steps again. The issue is fixed.

Steps:
1.Prepare a rhel6 guest or a rhel7 guest and use virt-viewer connect to the guest
2. Use mouse to drag the window to minimum, then virt-viewer window size will keep at 320x200 even if using mouse to drag the window to small size
3. Check the resolution of guest, the resolution should  be 320x200

So move the bug from ON_QA to VERIFIED.

Since the problem described in this bug report should be
resolved in a recent advisory, it has been closed with a
resolution of ERRATA.

For information on the advisory, and where to find the updated
files, follow the link below.

If the solution does not work for you, open a new bug report.

https://rhn.redhat.com/errata/RHBA-2016-2229.html