Some (but not all) of the blocks that shipped with Land Desktop 2006 have some associated lisp code that runs when they are inserted. It appears that much of this code predated the new interpretation of INSUNITS, and wasn't updated to account for it. When using Autodesk's own functions to insert any of these blocks, they will be inserted incorrectly scaled by a factor of 12 when using imperial units. One example is the graphic scale that is inserted via the symbol manager. A better example can be found in Civil Design. Go to Layouts / Sport Fields / Baseball and follow the prompts. If you have INSUNITS set to 2 (as Land Desktop seems to want to force), the baseball field will show up at 1/12th of its intended size.

From looking at the code in baseball.lsp, it appears that the function (ZZ_IN2CU 1) programmatically converts inches to feet, which, as of 2006, should already be handled by INSUNITS. The end result is that the block (which is drawn in architectural units) gets scaled by 1/12 two times - once by Land Desktop (baseball.lsp), and once by AutoCAD (INSUNITS).

Workarounds: Without acknowledging the underlying problem, Autodesk released a very poor workaround. Another workaround might be for you to try to force a semi unitless platform by setting INSUNITSDEFSOURCE and INSUNITEDEFTARGET to 0 for your system. Then you can set INSUNITS to 0 in all of your drawings by putting something like the following code in your acaddoc.lsp.

(if (not (zerop (getvar "insunits")))
  (setvar "insunits" 0)
)

(You might have to tweak this a bit to suit your needs. In fact, I keep ours in a common s::startup function.) Keep in mind, however, that Land Desktop itself tries to set INSUNITS to the value that corresponds to the unit type that you select in PROJECTS / DRAWING SETUP.

First Appeared: Land Desktop 2006
Status as of 2006 SP1: Still reproducible
Status as of 2007: This appears to be corrected. Tough luck, 2006 users.

Note: The INSUNITS issue with Land Desktop 2006 was undoubtedly a true bug, which like most true bugs, was never acknowledged on Autodesk's knowledge base. Despite the fact that this bug was corrected in LDT 2007, the new (2006+) interpretation of INSUNITS is still very much a nuisance in all versions of AutoCAD. Unfortunately, at this point, this feature is probably considered working as designed. The workarounds described above can still be used with all versions of AutoCAD to come close to replicating the old unitless system.