How to convert a bitmap font (.FON) into a truetype font (.TTF)?

Use FontForge + Autotrace then make some corrections manually.

First integrate Autotrace in Fontforge, see Autotracing bitmaps in FontForge. Here is how I have done it, as I wasn't able to use the win32 version of FontForge:

1. Download, unzip and start Portable Ubuntu Tres. It's a special linux version that works under Windows!
2. Choose System->Administration->Add/Remove Applications, search for FontForge and install it (administrator password is 123456). I got FontForge version 20090622 installated.
3. Download autotrace-0.31.1.tar.gz from http://autotrace.sourceforge.net/index.html#download and copy it in your home directory in Portable Ubuntu.

4. In Portable Ubuntu choose Applications->Accessories->Terminal to compile and install autotrace:

   sudo bash  (password is 123456)
   gunzip autotrace-0.31.1.tar.gz
   tar xf autotrace-0.31.1.tar
   cd autotrace-0.31.1
   ./configure
   make
   make install
   

Then convert your font:

1. Start FontForge in Portable Ubuntu and open the .FON font.
2. Save your font as a .BDF font (Loading a .FON file as background didn't work for me so I had to convert the font first): File->Generate Fonts and choose BDF as format.
3. Create a new font and import the BDF Font as background font: File->Import and don't forget select "As Background".

4. Select all characters and start an autotrace while holding the shift key so that you can enter parameters for autotrace. I used following parameters, which improved the recognition of the outline of the pixels but I didn't found the perfect parameters:

   -corner-surround=1 -line-threshold=10
   

5. Correct the chars manually using mostly the function "Add a curve point". Activating View->Show->Almost Horizontal/Vertical Lines makes the work much easier.
6. Generate a truetype font: File->Generate Fonts and choose truetype as format.

I know this question is old, but for what it is worth I was able to easily convert an old .fon to .ttf using PixFont. I ran it as an administrator (no installs - an old school executable in place) and it generated a good TTF even though the original .fon was missing some correct glyphs.

And, while it isn't free, at $29 it almost is, especially compared to the very expensive commercial products out there.