The Zoom dropdown just applies an inline style="zoom: 500%;" to the <body> of the RadEditor's iframe based content area. You will experience the same browser behavior with a standard editable IFRAME and our competitors' editors.
This is a browser behavior and it cannot be controlled / fixed with code or CSS setting. The good news is that the IE browser developers has fixed it in the new Internet Explorer 9. The problem does not exist in Firefox as well.
the Telerik team
Do you want to have your say when we set our development plans?
Do you want to know when a feature you care about is added or when a bug fixed?
Telerik Public Issue Tracking
system and vote to affect the priority of the items