The original way how WordPress sizes the tags in the tag cloud is a bit bad: if you have one tag that is used a lot, e.g. for every post, it makes all other tags too small to have any variance when compared to other less popular tags. I changed the way WordPress determines the size, get the patch here. It is also possible to define your own scaling algorithm, see the patch for more information.

This is how WordPress shows the cloud as of version 2.8.4

This is how the cloud is changed by my patch