Windows 7 only: System tweaking utility Alt+Tab Tuner customises everything about the Windows 7 Alt-Tab dialog, from setting the transparency to increasing the size of the thumbnails.
To customise the settings, all you have to do is unzip and launch the utility, drag the sliders to your suit your preferences, and click the Apply button. You can even use the utility to switch back to the old XP-style Alt+Tab dialog if you were so inclined. Alt+Tab Tuner is a free download for Windows 7 only.
If you aren't happy with the built-in Alt+Tab system, and even tweaking it won't help, makes sure to check out the awesome VistaSwitcher alternative, which even includes the Alt+` key combination to switch between specific application windows.