your coordinates are in decimal degrees, aka Geographic, and need to be projected to a coordinate system that uses feet or meters (ie UTM etc), use the Project tool in Arctoolbox ( http://help.arcgis.com/en/arcgisdesktop/10.0/help/index.html#//00170000007m000000.htm ) or project the data in ArcCatalog. The old forums contain hundreds of posts related to projecting data http://forums.esri.com/forums.asp?c=93 and equivalent help is in the older version help files ( http://webhelp.esri.com/arcgisdesktop/9.3/index.cfm?id=1890&pid=1887&topicname=Project_(Data_Management ) )
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