OK, I don't know how to call this, a bug, misfeature or what, but I find it quite weird.
Here's the thing, the video resize hotkeys have some weird issues. In particular the 1:1 key (or menu item). Part of the issue seems to have something to do with the video aspect ratio.
I was going to post some pictures, but doing a screen capture doesn't capture the video frame, so I'll try to explain.
Here's an example. I have a 384x480 video with an aspect ratio of 16:9. It seems that pressing the 1:1 hotkey resizes the VLC video frame to the video size in pixels (384x480), while still keeping the video at the 16:9 aspect ratio, which means the video is displayed at about the same size as in the 1:2 mode in order to fit at 16:9 ratio in a 384x480 window.
Video resizing worked fine in VLC 1.0.5.
In a somewhat related issue, if you disable the "Resize interface to video size" in the VLC Preferences, the VLC window won't automatically resize, yet I would expect for the video resize hotkeys to work, but they don't.
[EDIT:] Oh, this happens in both 1.1.0-pre3 and 1.1.0-pre4.