The reason this is not possible in SW 2010 SP2.1 by default is that a leading zero in a fractional dimension is not part of ANY standard. We have ran into this problem as well since our ERP likes leading zeroes.
The most you can do is to manually update the dimension/note/BOM to show a leading zero (ie in the dim have 1'-0 3/4" instead of <DIM>).
In 2007 SP5.0 I set the units to Custom, then chose "feet & inches" under the length unit. When I added a dimension and typed in 12.75" it displays as 1'-0 3/4". So, it does work on 2007.
Just an update. SW 2012 SP3.0 will display the dimension as 1'-0 3/4" if the "Include leading zero for values less than 1"" in the Fractional display options under Dimensions is selected.
All the answers are correct but I can only choose one. :-)