I can't replicate that in FF4 on Linux, even by zooming out. Text remains legible at all sizes up to the point where it's simply too small to see through the pixelization. The computed font shows as '"Liberation Sans",Helvetica,Arial,sans-serif'; perhaps you've got a bad render on one of those?
Could be, it doesn't become really legible until I have zoomed up several times. This is FF4 running on Win7.
I have the same setup, and can't duplicate the issue.
Thanks bmj, clearly something to do with my setup then
FF4 with hardware acceleration enabled has absolutely horrific font rendering; have you tried disabling it?