The Fractional Character Widths check box is found in the Preferences dialog box from the Layout menu in versions 1.0v4, 1.1v1 and 1.1v2. The default is on with new documents since this is the way previous releases of MacDraw II (1.0v1, 1.0v2 and 1.0v3) handled text.
These versions had fractional character widths turned on internally (therefore, there was no way to turn it off). However, documents imported from MacDraw 1.9.x will automatically open with Fractional character widths off, the same way MacDraw 1.9.x handles text. Once a document is opened, you may turn Fractional character widths on or off as desired. The setting is stored in the document.
You may need to turn the fractional character widths option off if you intend to export your illustration to a program which does not support fractional character widths, such as some versions of Microsoft Word.