Funny how you “rediscover” AutoCAD features when a problem occurs. This one came from a support call I received this week. Open a drawing in 2007 and the linetype scale in modelspace looks great. Open the same drawing in 2009 and all dashed linetypes look continuous. I found an explanation in the Autodesk Knowledgebase article titled, “Changes to LTSCALE not displayed as expected” ID: TS1070509 published May-14-2007.
If MSLTSCALE is set to 1 (the default value), the linetype scale in modelspace is controlled by the annotation scale setting (the CANNOSCALE variable) on the Modelspace tab.
If MSLTSCALE is set to 0, the linetype scale in modelspace is controlled by the LTSCALE variable as in previous versions of AutoCAD (2007 and prior).
A not-so-quick look at the AutoCAD help file would be useful to get yourself familiar with Annotative scaling. Lookup the topic “Overview of Scaling Annotations”. Also, the CAD Manager’s blog has a nice post on this issue.