Are you sure it's not a matter of trying to send raw ASCII data to a printer capable only of receiving rasterized GDI output? This is typically the case with low-end printers, and most ink-jets. See if clicking the "Emulate 10/17 CPI" and "Disable passthrough printing" options on the ZTERM Printer Configuration dialog solves the problem. (If so, then we know for sure what the issue is. Whether you like the solution is another matter.)
Note that ATE does offer some additional flexibility in getting the desired output using GDI printing (particularly the auto pitch stuff). But if you are currently embedding PCL ESC codes into the output stream to set the pitch, you'll probably have to remove that (since in GDI mode, ESC sequences don't make any sense to the driver).
