From the Apple Discussions site comes a fix for a postage-stamp sized Terminal window...
Problem: When I open the Terminal app, the window consists only of the upper most left button and a portion of the title bar ("very" tiny). I can't maximize the window and if I close it to open another, I get the same thing. I tried ditching my prefs, but still no joy.
Solution: The default font in Terminal is Monaco. If it's turned off, you get the small tiny window.
[robg adds: One downside of Font Book's easy font management for users is that I think we'll see more of this type of thing happening as they experiment with disabling fonts they just "don't use" or "don't like." My advice: leave the Apple-installed fonts alone, as you can never tell what will happen when they're disabled...]
Mac OS X Hints
http://hints.macworld.com/article.php?story=20031105110530578