Hey Maxx I just tried this and it only does it when you use the inset polygon on the tool bar. If you just hit  I- Key it works. Or Use the menu system (space bar) edit tools faces. It looks like you are right the Button is bugged. :)

Cybermonk, you're right@!  WOW!  I just tried it again on a fresh scene, and it works if I only use the hotkey!  Thank god, because that's something I will be using very often in my workflow, and if it didn't work at all, I would have been so screwed.  So it's a bug with the button only?  Maybe we can get someone from Blender Foundation to look at this thread and put in a bug fix request? THANK YOU for pointing out the workaround for this though.  Glad you saw this.  People just learning are likely to use the button first.  I wasn't sure which hotkey was for inset.  In 3dsmax, I have my inset hotkey set to CTRL-I, because my "I" hotkey is set to inverting the current face, edge, or vert selection.  Thanks again!  Let's hope they fix that soon.

---

Tools :  3dsmax 2015, Daz Studio 4.6, PoserPro 2012, Blender v2.74

System: Pentium QuadCore i7, under Win 8, GeForce GTX 780 / 2GB GPU.