illustrator: pathfinder minus front, cut-out is crude, not precise enough

CS5.

Trying to cut out text from a shape behind it. I select the text, then Object > Expand..., then select it along with the rectangle shape behind it and do Pathfinder > Minus front. The cut-out shape comes looking like shit.

In Pathfinder Options, I have the precision set to 0.001 pt (although it doesn't seem to change anything), the other options don't make a difference either. I've only had this problem with this particular rounded typeface. Any ideas how I can get it to cut directly along the outlined path?