email is all squished

By squished do you mean when you open the email all the text is small or jammed together? what is specifically squished?

I have had this problem in that emails I sent to my mum arrived on her ipad all squashed up and virtually unreadable. Like you it was not an option to stop using the accessibility larger font. I found that it was to do with the signature on my Hotmail email. So by changing this to be "plain" instead of "rich" it has fixed the problem and she can now read the emails - hooray!! I hope this helps.

So the problem was with how they were formatted by the sender in my case.

Are other items squished besides the email? Like when your browsing the the internet? or reading a book? Could be a feature enabled in settings. Go to settings>general>accessability make sure Zoom and Large Text are set to off. Hope that helps, if not let me know.

iOS 8.3. (2015). I had changed accessibility to larger font. setting it back to the default fixed "squished emails"

This is happens to me as well - in email from various sources, but not all. Sure, I could fix it by setting the font to be smaller, but that doesn't help me see what's on the screen. Isn't that the whole point of the dynamic text? It looks like the feature does not account for some formatting, which, in my mind, is a bug. You'd think Apple would fix this by now.