I have to confirm the problem described by Jeff in the initial post. Export to CAD tool creates CAD files with units set to inches regardless of the spatial reference settings set in the tool. These exported CAD files work just fine within ArcGIS and show correct units. But opening them in proper CAD softwares (AutoCAD, MicroStation...) shows that the units are, indeed, reverted to inches even if the spatial reference system defines them as, say, meters. The effect of this is, of course, that the generated CAD files are not spatially correct unless you happen to work with reference systems defined in inches. The workaround for this is to use a seed file with proper units set in it, as Jeff points out. However, this workaround does not work with Extract Data and Extract Data Task tools which internally use Export to CAD tool but do not expose the option to set a seed file. So this flaw in Export to CAD tool renders Extract Data tools completely useless as well. I think it's fair to expect that Export to CAD tool would also respect the units set by the spatial reference system the same way it respects all the other aspects of the spatial reference system. Or at the very least, a setting specifying the "INSUNITS" would be very useful, as Jeff suggested. This default unit setting of inches is not a documented feature of Export to CAD tool and hence seems like a bug or mishap in the tool rather than a conscious design choice. Hence I hope this would get resolved in future releases of ArcGIS.
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