I am relatively new to Inkscape being formerly a frequent user of Freehand and Illustrator. I have a question with respect to the transformation dialog.

Inputs in the transformation dialog currently only accept three digits to the right of the decimal. Is there a preference I can change to increase the allowable precision (number of digits)? If not, I think it would be a nice (and probably easy) feature to include.

I agree that would be nice. In preferences>svg output>Numbers there is an option to increase the number of significant digits used by inkscape in the svg it writes, but the GUI limit of 3 numbers to the right of the decimal point is not affected by it. So if you want to open and edit the xml you can enter a precise dimension but this won't help during transforms, unless you 'preserve' transforms which opens up a whole different set of problems!
A workaround although most inelegant is to work at 1000% or 10,000% and then scale everything down.

Thanks for the information! I was unaware of the SVG tolerance setting in the preference panel which is nice to know about for future use. But right now I'm not as worried about the 8 digit precision that the SVG output offers, but the 4 (or 5) digit precision in the Transform dialog.

Really, what I'm trying to do is some repeated transformations with relatively high accuracy for some geometric drawings. It looks like some of the new snapping features listed in the release for 0.49 might help, but I do think the transformation panel could stand to support higher precision. It seems to me the only reason to have the cut off in the dialog where it is right now is aesthetic so that everything fits nicely in the dialog.

I've tried editing the XML directly, but because I want to be able to produce many many repeated transformations, I really don't want to input all the new calculated parameters manually. Also, the workaround you suggest is not really a workaround for the transformation dialog; making things bigger to shrink them back later increases the manual precision of my mouse or eye, but will result in (essentially) the same transformation if using the transformation dialog (I say essentially because you will probably add some precision to the already very precise object definition, but the inaccuracy in the transformation will stay the same).

So I'm guessing I cannot hack higher precision at the moment by myself (don't want to/cannot rewrite/build a new version). It would be great to hear an Inkscape programmer's opinion on this subject because it does seem to me like it should be an easy fix, and if not, I'd love to hear about the complications. If there's a more appropriate forum for this inquiry, I would appreciate the moderators pointing me in the right direction.

Just found this topic.

Except for the rotation and the matrix option, the rest can be done accurately for any needs.
By adding the input data in pixels and not in percents.

Here is a bit related topic:
http://www.inkscapeforum.com/viewtopic.php?f=5&t=16307