I've seen a rash of complaints lately that the compose mail window in Outlook is the size of a postage stamp. While not common, and seen less often in recent years, it is a sign that Outlook (and the computer) recently had problems with resources - usually too many windows open and not enough memory.
Resizing the window, closing it then reopening it will fix it. Do not resize the window then compose a message and send it - this will not set the new window size. You need to resize the window then close it for Outlook to remember the size and location.
An old Windows trick for setting window sizes also works with Outlook 2007: hold down the Shift key while you double-click in the top left corner of the window. This will close the window and when you reopen, it should remember the size and location.