My application which I built for 1.5, shows text blurry on high density screen of HTC Desire and the like. Here is a close up screen shot from my application (bad.png) and a better example (good.png)
Yes, I am building a soft keyboard. And the text is drawn with canvas.drawText. All the discussions I found online is about image resizing issues.
You should read this guide
Basically, if you want support 1.5 devices you should build your project against SDK >= 1.6 with the minSdkVersion setted to 3:
<uses-sdk
android:minSdkVersion="3"
android:targetSdkVersion="4"
/>
On this way you will be able to have differents drawable resources for differents screen size/density without breaking the compability with Android 1.5 which assumes all screens are "mdpi". obviously you can't use any api released after sdk version 3