I ran some more testing and manually measured the text size as placed in MicroStation. Before we placed the text but relied on the Element Information Height and Width to give us the heights not thinking of the physicall size.
When using a Text Style and you have a Project Options > Text Scale Factor set, when InRoads places that text it appears to be doubling the text scale factor. So if I have a text height and width of 1, the Model scale is 1:1, using a text style, and the InRoads Text Scale Factor is set to 50, we would expect the text to display as 50 units. However once the text is displayed it is drawing the text at 2500 units (50^2). I then go set the "Is Annotation" from True to False in the Text Element Information and the text resizes down to 50 units. I then change it to True again and the text does not change (as it shouldn't because of the model scale being 1:1). So it is incorrect when being placed.
So it does appear that when using a Text Style it places the text too large. As a workaround, if working with MicroStation Text Styles have your InRoads Text Scale Factor set to 1 and use the text symbology height and width to control the text size.