When I look at our website in IE8 the text we have set to display smaller doesn't display smaller. But when I use BrowserShots.org it shows IE8 renderings with the smaller text appropriately smaller.
So I'm thinking that there must be some setting in IE8 for "minimum font size to display". It's not the the TextSize (set to Medium) or Zoom setting (I set/reset zoom to 100%). It's something else.