Use Edit > Preferences > General, and check the Draw zoomed out views using area averaging box.
On my WinXP Home SP2 system, screen set to 1280 x 1024, the following zoom percents retain smooth lines display:
At 12.5% it’s hard to tell for sure, but it does seem a little better with the box checked.
In Edit > Preferences > General, you can set Magnifier Increments to 25% then click with the Magnifier tool to zoom in or hold down the Alt/Option key and click with the Magnifier tool to zoom out. Double-click the Magnifier tool icon to return to 100% zoom.
Or, if you prefer, choose the preset zoom increments from the Property Bar’s zoom percent drop down list.