I had troubles with improper window embedding in firefox, so I decided to upgrade my dusty private branch of ion to 20060305. Get it here: http://clemens.endorphin.org/patches/ion-3ds-therp-20060305.tar.bz2
There are a few changes concerning XFT support. First, the separate draw engine code of xftde was merged back into the regular de. XFT is now a compile type option to configure (enabled by default) and about 40 #ifdefs embedded in the de/ source files. The consequence for you is that you do not have to rewrite your look configuration to refer to xftde. So, it's "de.defstyle" again, instead of the old "xftde.defstyle". This is pretty neat as XFT also understands X11 font specifiers and so your old configuration will work right out of the box, but now with proper XFT rendering beauty. To use XFT font specifier, prepend "xft:". For instance, "xft: Sans-10:weight=bold". Here is sample config using XFT font specifiers (using the "Sans" font; will map to Bitstream Vera Sans on most systems).
Update: Tom Payne, the Gentoo maintainer of ion, pulled the XFT part of ion-therp into the official Gentoo ebuild. See his posting.