Yes and Yes...and yes we (an engineering firm CIVIL) do put texts in the model space.
That is kinda a requirement for Civil3d, since the 'desk hasn't bothered figuring out inter-space associative labeling. If I could, it would all be PaperSpace.
But I don't think it's correct to think of c3d labels and annotation (eg profile views) as 'annotative'. they may resize themselves based on zoom factor, but since you can't assign an annotative scale to control them, or set different display locations based on annoscale, they really are not annotative.
Layers help in hiding stuff from subs I don't want to see, but a) way too many surveyors throw the text and the graphics on the same layer (E_WAT as a water main with the text, leader, valve, &pipe all on on that layer) or those C3D people who rely on modifying colors for their styles and keeping everything on layer 0.