HI @melissacohen,
I am looking at your file. I suggest that you do not need to use an Annotative text style inside your DIMSTYLE that is set to be annotative. I set the style to Standard (non-annotative).
Regardless, if you set your units so that the Length precision is 1/32" instead of 1/8" then you set set your text to be a smaller size than 1/8".
I made a quick video that shows how this works. I open units, set the precision to 1/32". I then open the DIMSTYLE and change the text height to 3/32". This is applied immediately and I hope that you will see the change on your screen.
You can obviously set the precision displayed in your dimensions independently from the UNITS settings under the Primary Units tab>Precision (you have it set to 1/16" currently)
Please select the Accept as Solution button if my post solves your issue or answers your question.
John Vellek
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