No it didn't - the -dpi 100 is still there. After reading many posts regarding this subject I inspected my xorg.conf and noticed something that seems strange: its Section Files is empty, like this:
In other xorg.conf examples there are many paths to fonts between these statements.
Suspicious about it, and in order to learn something, I've installed only Kubuntu 7.10 in another machine. Wow! Its fonts, graphics and icons are crystal clear, much more than in my XP. I've managed to set its resolution to 1440x900 in a 22" monitor and am stunned with its visual effects and quality. Now I have to understand what LMCE is doing behind the scenes that is causing my problem.
Thanks a lot for your interest,