Apologies for resurrecting this old discussion, but it seemed like the best place to put this.
I was thinking about this whole font licensing thing, and it occurred to me that I remembered someone who was working at a game company and made free fonts: Ray Larabie. So I searched the forum, and nobody has mentioned him, which is shocking - he's a Microsoft vendor from way back. Surely someone from the team remembers him?
I've used Larabie fonts for years, although not recently. They're free for personal and commercial use, so it's a no-brainer when you're building graphics or a logo. However, I wasn't sure about embedding; I crawled through my archive CDs, and found a Larabie font collection from about 1998 - each archive with a license file in it that appeared to allow embedding. But since I wasn't 100% certain, and the file was ten years old... I went to larabiefonts.com (which I was happy to find is still there), clicked around, downloaded a few of his newer fonts from myfonts.com, and pulled a license file from the newer fonts. It was the same license. So I headed back to his site and pulled the help file, to see if he covered font embedding - and he did (all emphasis mine):
Q: I want to use Larabie Fonts in my software application. What should I do?
A: Determine whether you intend to embed or include the font(s) in your software.
Embedded fonts: the end user only view the fonts on-screen or print text from the screen.
If the embedded fonts are selectable (part of a selection of fonts) you must include the original font name and trademark in your software credits or documentation and on your website, if possible. Never alter the name of our fonts without our permission.
Embedded fonts that are not user selectable don’t need to include the font name or trademark but we would appreciate inclusion of our URL in the software credits or documentation and or on your website, if possible. Never alter the name of our fonts without our permission.
Embedding Larabie Fonts in any format is free of charge and you don’t need our permission for embedding them in your software.
Ray Larabie has 276 fonts available on myfonts.com, all of which can clearly be used in SpriteFont files for XNA games according to this plain-English license. Be aware that Ray Larabie also offers another 184 fonts at myfonts.com through his type foundry Typodermic, which are not free, and cannot be embedded without a separate license negotiated and purchased through Ascender Corporation which handles all his licensing.
So if you're sitting around wishing you had better fonts to use in your game, you've now got over 250 available to choose from, and the available styles cover pretty much any kind of game you're building.