Font problem and tutorial question

1. Here's the problem: I don't know why but I cannot use "regular" font size in PS CS2. For example, I have to set my font to 430pt because either way it will be tiny and not visible on the graphic. How can I fix it?

EXAMPLE

2. How to make a blinkie like the one below in PS or Image Ready? I searched the archive but only found GIMP tutorial.



Thanks in advance!