Displaying the model units in the text creation dialog is confusing. It should not display any units since text can be setup in model or layout units (with or without layout scaling).
That said, after 15 years of Rhino use, I am still not sure if we are using the annotation scaling features correctly. I would be thankful for a comment about our setup as well. It is as follows: All annotation values are setup for layout space in mm (dimensions, text, hatches, line thicknesses, etc.). This allows us to have them comparable to other architectural software we use. Layout units are mm, model space is meters. We use a custom script that sets the model display scaling of the different elements (text, dims, hatches, line thickness, etc.) for a set scale. The script unifies commands such as (TextScale, HatchScale, Dimension properties->Model space scale, etc.)