More from that IRC conversation:
<alesguzik> I'm not asking about making it default, but when screen size can be detected and resolution is known, what is the problem with dpi?
<alesguzik> It worked at some point in the past
<ohsix> it never worked

Ohsix's definition of "never" must be different from the dictionary's. As alesguzik said, automatically matching DPI to display density did work in the past:

$ cat /etc/SuSE-release
openSUSE 10.2 (i586)
VERSION = 10.2
$ head -n15 /var/log/Xorg.0.log | tail -n6
X Window System Version 7.1.99.902 (7.2.0 RC 2)
Release Date: 13 November 2006
X Protocol Version 11, Revision 0, Release 7.1.99.902
Build Operating System: openSUSE SUSE LINUX
Current Operating System: Linux m7ncd 2.6.18.8-0.10-default #1 SMP Wed Jun 4 15:46:34 UTC 2008 i686
Build Date: 02 June 2008
$ grep Output /var/log/Xorg.0.log | egrep -v 'disconnected|no monitor'
$ grep -v ^\# /etc/X11/xorg.conf.d/50-monitor.conf | grep DisplaySize
grep: /etc/X11/xorg.conf.d/50-monitor.conf: No such file or directory
$ grep -v ^\# /etc/X11/xorg.conf | grep DisplaySize
$ grep -v ^\# /etc/X11/xorg.conf.d/50-monitor.conf | grep PreferredMode
grep: /etc/X11/xorg.conf.d/50-monitor.conf: No such file or directory
$ grep -v ^\# /etc/X11/xorg.conf | grep PreferredMode
$ xrdb -query | grep dpi
$ xdpyinfo | egrep 'dime|ution'
  dimensions:    1600x1200 pixels (402x302 millimeters)
  resolution:    101x101 dots per inch
$ xrandr | head -n5
 SZ:    Pixels          Physical       Refresh
*0   1600 x 1200   ( 402mm x 302mm )  *85   75   70   65   60
 1   1400 x 1050   ( 402mm x 302mm )   75   60
 2   1280 x 960    ( 402mm x 302mm )   85   60
 3   1152 x 864    ( 402mm x 302mm )   75

more Xorg.0.log excerpts:
(II) RADEON(0): EDID data from the display on port 1 ----------------------
(II) RADEON(0): Manufacturer: NEC  Model: 61da  Serial#: 5356
(II) RADEON(0): Year: 2002  Week: 39
(--) RADEON(0): Virtual size is 1600x1200 (pitch 1664)
(**) RADEON(0): *Default mode "1600x1200": 229.5 MHz, 106.2 kHz, 85.0 Hz
(--) RADEON(0): Display dimensions: (400, 300) mm
(--) RADEON(0): DPI set to (101, 101)
$ xrandr -v
Server reports RandR version 1.1


$ cat /etc/SuSE-release
openSUSE 10.2 (i586)
VERSION = 10.2
$ head -n15 /var/log/Xorg.0.log | tail -n6
X Window System Version 7.1.99.902 (7.2.0 RC 2)
Release Date: 13 November 2006
X Protocol Version 11, Revision 0, Release 7.1.99.902
Build Operating System: openSUSE SUSE LINUX
Current Operating System: Linux m7ncd 2.6.18.8-0.10-default #1 SMP Wed Jun 4 15:46:34 UTC 2008 i686
Build Date: 02 June 2008
$ grep Output /var/log/Xorg.0.log | egrep -v 'disconnected|no monitor'
$ grep -v ^\# /etc/X11/xorg.conf | grep DisplaySize
$ grep -v ^\# /etc/X11/xorg.conf | grep PreferredMode
$ xrdb -query | grep dpi
$ xdpyinfo | egrep 'dime|ution'
  dimensions:    1920x1440 pixels (403x302 millimeters)
  resolution:    121x121 dots per inch
$ xrandr | head -n5
 SZ:    Pixels          Physical       Refresh
*0   1920 x 1440   ( 403mm x 302mm )  *75   60
 1   1856 x 1392   ( 403mm x 302mm )   75   60
 2   1792 x 1344   ( 403mm x 302mm )   75   60
 3   1600 x 1200   ( 403mm x 302mm )   85   75   70   65   60
$ xrandr -v
Server reports RandR version 1.1

more Xorg.0.log excerpts:
(II) RADEON(0): EDID data from the display on port 1 ----------------------
(II) RADEON(0): Manufacturer: NEC  Model: 61da  Serial#: 5356
(II) RADEON(0): Year: 2002  Week: 39
(--) RADEON(0): Virtual size is 1920x1440 (pitch 1920)
(**) RADEON(0): *Default mode "1920x1440": 297.0 MHz, 112.5 kHz, 75.0 Hz
(--) RADEON(0): Display dimensions: (400, 300) mm
(--) RADEON(0): DPI set to (121, 121)