I just had a rental from Dollar last Tuesday - Sunday. It was part of atrip I won, so I wasn't paying for the basic rental cost, but I did find that they were really pushins hard sell on the insurance. I told the agent no thanks, my car insurance covers rentals, to which she replied "you do realize we don't go through your insurance, right?" I'm not quite sure what she meant by that, except maybe they would look to me for any payment for damage, and I would then have to work with my insurance company - but in the end, my insurance would still pay. I just find that their selling techiniques on the insurance are so deceptive - someone could take her statement to mean that my insurance won't provide the coverage. Besides which, I just found that particular agent to be rather rude and abrupt, but figured she was having a bad day, and tried to be pleasant anyway. On the upside, the return agent was very friendly.
As to documenting any damage when you pick up the car, what they do is give you a little slip of paper along with your keys, and it has a section ot note any scratches, damage, etc. that are already on the car. So, you make note of anything, take it back to the booth in the garage, and the agent their signs it, so you have documentation of the fact that you did not damage the car. Although, if you have the video camera, as another poster suggested, I think that's a great idea.