Ok, I can't add anything to thbegin's comments other than
I feel your pain on this one.
Yeah I used to hate anything I did with text with PS 4, 6 and 7. I noticed when I added fonts early on and then made the picture smaller the fonts looked real crapy. I also noticed I didn't loose as much resolution of the fonts if added them last and kept them as fonts (not rasterized).
Now that I have CS I have found it to be less crappy in handling rasterised fonts but then now I'm in the habit of not adding them until later in my creative process.