Pressing I in edit mode brings up the dotted line but nothing happens. I have applied the scale to 1.0 and my Unit spacing in scenes tab is set to 1.0. If I hold down ctrl while using inset the lid seems to want to scale.
I dont know what exactly you want to do with the inset, but you need to have some faces selected and then press I and it will work. If you have every face of the mesh selected, then it will not do anything. If you want to inset every face at once, you have to press I again, and it will inset each face individually. When you hold ctrl while insetting, it changes the depth of the inset. Which may look like scaling if you have everything selected and blender cannot inset it.
So im guessing you tried it with everything selected?