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Hi,
with FSX-SP2 they work the same way as FS9.
FSX SP2 has broken LOD's for scenery items due to it's batching of draw calls to improve performance.
Well let me try to be clear:
LODs work in fsx-sp2. But you cannot lod to a dummy. You need to have at least a single poly.
Nota: Lods to dummy compiled with sdk-fs9 work fine.
So the answer is no. You need to include not a dummy but a single poly.
I have proved LOD's don't work with "simple" objects (high poly count but only 1 draw call) I will test again tonight with a multi draw call object.
The message I had that LODs were broken in SP2 came directly from an ACEs developer.
LOD works in FSX.
If you have big objects, use high numbers.
In my scenery for Halifax http://www.simaddons.com I use
1. xxx (dummy)
2. xxx_LOD_50 empty
3. xxx_LOD_990 low res
4. xxx_LOD_1000 high res
For a apron scenery I have up to LOD 1800
Gmax - be shure you have the update script for LOD

