@apweng
No, the precision does not affect image insertion.
More important than the ‘precision’ is the native coordinate system of the image. When your image was initially created, the author gave it a projection. Examples include WGS84 Mercator EPSG 3857 (meters), LL83 EPSG 4269 (degrees), and State Plane Zones NAD83 (feet).
When you assign a coordinate system to your modelspace, your drawing becomes a flat representation of Planet Earth complete with an invisible equator and north pole. When you add a geospatial image to your drawing, the program will do three things: (a) scale the image so it has the right size, (b) rotate the image it has the right north orientation, and (c) move it so it lands in the correct spot.
Understanding the native CS of the image is frequently misunderstood when inserting an image. An image’s native CS must always be honored, not overlooked. Never ever.
Example: An image with native coordinate system using Degrees can be inserted into a drawing with an assigned coordinate system that uses Feet. AutoCAD will perform a transformation to make the image insert accurately. Letting the program perform this transformation is far more critical than precision of drawing units.
Chicagolooper
