iPadOS 16.2 update messes up Reader

Having tried, I’ve not been able to replicate what you are seeing. Try a forced-restart - as this will often clear an isolated software issue:

Force restart iPad (models with Face ID or with Touch ID in the top button)

If your iPad doesn’t have the Home button, do the following:

1. Press and quickly release the volume button nearest to the top button.
2. Press and quickly release the volume button farthest from the top button.
3. Press and hold the top button.
4. When the Apple logo appears, release the top button.

Force restart iPad (models with the Home button)

Press and hold the top button and the Home button at the same time. When the Apple logo appears, release both buttons.

Have you tried changing the font size? Tap the icon at bottom-right - then select Themes & Settings. From here, simply tap the smaller “A” to reduce the font size, or the larger “A” to increase.