The problem i have is this, if i set the base font size to anything less than 100% the text virtually disappears.
Hmmm ... while 12px is small, it shouldn't almost "disappear". Is that only happening for you, or for multiple multiple users? Plus, is this the same issue you were having back in Navwrapper interfering with page font sizes [webmasterworld.com]? I am asking because if it is just you then it is likely to be your settings, or your eye-sight. If it is more than your set-up/you and a long term problem, then we need to dig deeper.
Fotiman, that's a great test thanks! cheaperholidays, can you look at that and tell us if the words seem very, very small, or just normal (but small) 12px.
Second, are we not dealing with much higher screen resolutions than the "old days"? ...
Generally yes, but you asked why the OP was mixing % and ems.