IN SQL Server 2005 (and, if I recall right, 2000), first select the table or tables you wish to adjust, and then select "Autosize Selected Tables" from the right-click menu or the "Database Diagram" menu. There does not appear to be a matching toolbar button.
Despite this, in 2005 I find I sometimes need to manually widen the "column name" column so that, when it prints, my entire column is printed. Similarly, I sometimes have to widen the table window (horizontally and/or vertically), to ensure that scroll bars are not included in the printout for each window.
The tool is useful in 2000, but they made it a bit less useful and much more irritating in 2005. I haven't used it yet in 2008.
Two more cents: I used Erwin a bit and hated it. I used Embarcaderos' ER Studio a bit and loved it. Both cost major money, so you may well have to make do with diagrams.