Distro: Redhat Linux 9 (no DOS partition)
Why do i see unreadable fonts in the installation of Windows application under Wine? I also experience the same whenever I use any Windows applications. I just see box looking characters. How do I fix this?

change the font to something else. an example of what you're experiencing would be on wesites in a different language and the font your using doesn't have a character in the fontset to correspond to a character that the page is specifying. a specific example would be to go to a chinese webpage using a normal font like arial (or where you don't have any chinese unicode fonts installed). you'll see a whole bunch of box like characters.

oh yeah, you may want to download some *.TTF fonts and put them in your /home/user_name/fake_windows_C_folder/windows/fonts directory.

but as you see i dont know which fonts to get and arent those font copyrighted by M$? are there any legal ways for that?

http://franksworld.net/winetools.html
http://corefonts.sourceforge.net/

it's all legal. you can use your windows fonts in linux. they can't tell you not to.