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The X server can't figure out what the resolution of a monitor is if the DisplaySize parameter isn't set in XF86Config. When it has to guess, it usually guesses 75dpi instead of 100dpi, which (a) is questionable given the high resolution of most modern monitors and (b) makes fonts and such look really awful. The database used by Xconfigurator should have monitor sizes and add them automatically to the generated XF86Config. For database entries that don't have a monitor size, Xconfigurator should prompt for it.
IMHO users should never ever _have_ to configure something like this. It should be autodetected wherever possible, and default to something minimally sane elsewhere. Forcing DPI setting, or even presenting it somewhere by default is an overcomplexity IMHO that a user shouldn't need to see. It is however questionable wether 75dpi is a sane default or not. It is the X server itself which chooses 75dpi however. Basically DDC probe sets the DPI. If DDCprobe fails, or if a user supplies DPI info, then the commandline or config file take precedance. Not sure if this belongs in the X config tool or not right now, but I don't have a 100% hard opinion on it yet either. Plus X has changed quite a bit since this was filed, and X will be changing even more yet to come. I'll reassign this to redhat-config-xfree86 for now.
redat-config-xfree86 allows you to set the DPI (display size), and it defaults to using what DDC probes.