I burned some time yesterday over a documentation inconsistency.
The dovecot-example.conf file shipped with dovecot (checked with 1.1rc4 and the April 3 nightly), includes an indication at the top that the commented values listed are the defaults for the settings. Line 248 of this file has the inbox setting for a private namespace which indicates that the default value for this setting is true. However, line 358 of ./srv/master/master-settings.c sets the default value of the namespace inbox variable to false. With a single private namespace (what I was setting up), one wants this value to be true, however when using multiple namespaces the default should likely remain false. I propose keeping the coded default and changing the line in the example configuration file to indicate false.
Before I determined that this was the issue, I had a single namespace defined (but not as INBOX), and dovecot (both deliver and imap) created and read from a .INBOX directory under the Maildir.
Thanks, Joel