More details for method 2, scaling dimensions:
General Scale in Dimension settings is to scale arrows, text and extension lines. It is meant to scale up/down the dimension decoration on large/small drawings.
In this case General Scale should be like 1000 or possibly more or less, depending on overall size of the drawing.
Basically General scale is to modify the dimension style to make it readable on a scaled printout and it must not match the unit scale factor.
Length factor is what modifies the measurement value and must be 0.001 when a mm drawing is annotated in m.
See my references above.
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