This issue could be caused by having Large Fonts (120 DPI) enabled in Windows. Visual Site Designer only works with Normal Fonts (96 DPI). Here's how to change these settings:

Windows XP

Right-click your Windows desktop and select Properties > Settings tab > Advanced. In the screen that appears, change the DPI setting to Normal (96 DPI).

Windows Vista and Windows 7

Right-click the Windows desktop and select Personalize > Adjust Font Size. In the screen that appears, change the font size to Normal (96 DPI).

After you make this change, restart your computer and then open Visual Site Designer. It should work normally.