The reason 96PPI is the default is because 99.9999999999999999999999999% of everything is designed for that PPI resolution. Unless you have some EXTRAORDINARY reason for changing that, like a software you use to make a living that absolutely won't work with 96PPI, then you should return it to the default.
Pixel size and density of a display should have no effect on font PPI and vice versa. If you have the display properly set (display DPI and dimensions - not font PPI) things should and would look correct in any software you have installed, other than the aforementioned exception if it exists.
If what I have done is incorrect, would you please tell me which setting to edit to tell my computer how to display fonts correctly? You see, the display of my laptop is a 14-inch screen with a resolution 1366x768. Naturally, I run it at native resolution. That works out to 112 pixels per inch.
One point is 1/72nd of an inch. That means that a 12-point font should be 1/6th of an inch in size. On my display, that means 1/6 * 112 ~ 19 pixels. However, if Windows is set to 96 PPI (or as Microsoft prefers to call it in Windows Control panel, DPI, which is actually a print term and should not be used of monitors), that font is rendered at 1/6 * 96 = 16 pixels.
Just to make sure there is no confusion on which PPI setting I have edited, here's a screenshot (in Finnish, but the layout is recognizable enough):
That article goes more in depth about using scaling and fine tuning it. It's for vista but the setting are the same in 7. I have a 23" HD monitor so I never use it.
I checked out that article; it refers to the same PPI setting I used. The only difference is that it advises to use Windows XP style scaling, because some programs are not designed to work with DPI scaling. Does this mean that Reader is one of those programs? If so, I consider that ridiculous! Vista was released to manufacturing in late 2006, so it predates Reader X by four years! Why haven't Adobe's developers made their software high-DPI aware? Actually, scratch that; Photoshop is just fine. Why isn't Reader high-DPI aware? Maybe I'll check out Foxit Reader to see if they've done a better job on staying up-to-date.
On the other hand; the Windows behaviour isn't quite preferrable either. I changed the PPI setting not because of my poor eyesight, but because I want UI components defined in absolute units (pt, cm) to be rendered the correct size. If Adobe Reader is still using pixels as measurements, then it should not be scaled, but displayed at the pixel-correct size.
EDIT: No, Foxit Reader suffers from the same problem. Seems like I won't be switching.
"Reader" was released in 1993 so it "pre-dates" Vista by thriteen years.
A caveat: When Windows says "some" programs you can't take that literally to mean just some. They said "some programs may not work with Windows XP SP1" in 2003 and the last time I checked, "some programs" was a list of over 1600 applications from more than 900 manufacturers. Reader X is "backward compatible quite a way http://www.adobe.com/products/reader/tech-specs.html and has to be able to work with ten or eleven year old systems which likely still have 13" 4:3 CRT monitors and 1024X768 resolution. Personally I haven't seen 1024X768 in years. Hell, my daughter's netbook runs 1280X800. Photoshop, Flash, InDesign, Premiere, OnLocation, AfetrEffects and the like have UI features that because of development standards have moved far beyond compatibility with older systems, but PDF's are still being sent by e-mail and downloaded from websites by these older systems so they can't update it yet I'm guessing.
The default settings for DPI are default because most software is designed to work at that setting. As you have seen, messing with it causes more problems than it solves.
An update on the issue: setting "Disable display scaling on high DPI settings" in the compatibility settings for the Reader Binary allowed me to see a nice-looking window correctly sized documents. This however seems like a hack, and it would be nicer to have high DPI-aware software.