Lucian on Googe Product Forums has come up with a step-by-step solution which works! Here is his advice - if I can follow it, anyone should be able to...
It is possible to enlarge the folder names on the left. If this looks too complicated, ask somebody else to do it for you.

1. In Windows click Start > Control Panel > Folder Options (If you don't see Folder Options, on top right switch to small icon view)
2. Select the "View" tab and uncheck "Hide file extensions for known file types"
3. On your desktop right click to empty space and select " New > Text Document" and name it to constants.txt
4. Open constants.txt and leave it open. The reason we are creating this file is to avoid problems with file permissions. Therefore we don't edit the original file or a copy of the original file.
5. Close Picasa.
6. On your keyboard press "Windows + R" keys. Hold down the Windows key and press R. The Windows key is between Ctrl and Alt keys at bottom left.
7. In the Run window, copy and paste one of the following lines and click OK.
In Windows XP: C:\Program Files\Google\Picasa3\runtime
In Windows Vista/7/8: C:\Program Files (x86)\Google\Picasa3\runtime
8. A folder called "runtime" will open. Inside this folder find a file called "constants.ui". Select this file (don't open it) and press F2 to rename. Rename it from "constants.ui" to "constants-old.ui". If windows says "You need administrator permission". Click "Continue".
9. Double click on "constants-old.ui" to open it. Windows will ask what program it should use to open. Select "Let me chose from the list" and then select "notepad"
10. When the file opens in notepad, on top click "Edit > Select All". Then click "Edit > Copy" Close this file.
11. Go to constants.txt. On to click "Edit > Paste".
12. In constants.txt change "alist_height" from "22" to "25". It is the first item on top. Don't make it bigger than 25. It will be too big.
13. Also change "alist_fontsize_win" from "14" to "17" It is the third item on top. Don't make it bigger than 17. It will be too big. Make sure it is the "win" and not "mac" file. Close this file. Windows will ask you, "Do you want to save the changes?" Say yes.
14. On your desktop select constants.txt, press F2 and rename to constants.ui
15. Right click to this file and cut.
16. Go to runtime folder. Right click to empty space and paste. If windows says "You need administrator permission". Click "Continue"
17. Start Picasa