Running 10.5.8 on a Dual-Core Intel Xeon. It was not behaving well on boot up. In fact, it wouldn't boot up at all. After booting up in safe mode, I did a bunch of software updates to see if this would flush out the problem. But now that it's boot up again, it seems like it's still stuck in overly-large icon and window mode. It's not zoom. I looked at that and I know yo can control the size of the icons on the desktop, but what about the size of the windows when I open an application?
From your description, it sounds like in System Preferences > Displays, your monitor resolution setting is defaulting to a lower value than it had been set at for your display.
It also sounds like your "update" process was flawed. You may end up needing to do a full OS re-install. There have been many posts in this forum and in the FCP forum about bulletproof ways to do this correctly to avoid problems.
Search the COW for OS X install wisdom.