I got several responses on this.  Thank you for  all that responded.  There are
basically two ways to do this, as described below.  However, both involve
creating a extra theme, either a copy of the orignal or converting labels to an
annotation theme.  This works, but if you need to do this for more than one or
two themes in a view, your TOC quickly becomes cluttered.  And if you move the
annotated one down to the bottom, you likley will have problems with one theme
covering the annotations.  hoepfully ESRI will make this a core cpability in
future version of AV, or maybe ArcGIS 8.1.

Scaled Labels

Response 1.  Attach the labels to a new theme, which is out of sight and set the
minimum and maximum scale for this theme
·    create a new point theme with one point (somewhere out of the extent you
want to look at)
·    detach all graphics from the theme which labels
·    select all graphics
·    attach all labels to this new point theme
·    set minimum and maximum scale in the theme properties.

Response 2. You could use the script on the ESRI ArcScripts page to convert your
text to an
shape file or annotation coverage...and then when you load it as a theme....you
could set the scale factors for minimum and maximum display in the Theme
properties dialog.

Response 3. Two ideas:

A) Convert your labels to an annotation theme or avt file--See the
ArcScripts page.  Then set the theme scale properties for the annotation
theme.

B) Duplicate the theme.  Make one theme transparent, but keep the
labels-->set the scale properties.  Make the other theme always visible.

Response 4.  The only thing I can think of to allow you to have labels turn off
independent of the theme is to have two themes.  One with the labels at
small scale, the second without the labels are large scale.  This is clunky,
but it does work.  The second theme holding the labels doesn't need to be a
copy of the first theme.  In fact, I just tried it with a point theme with a
single point.  I changed the display of the point to clear.  It didn't show
in the View, but it did allow me to attach the graphics from my other theme.
Check the online help for Attaching and Detaching Graphics if you don't know
how to do that.  I then set the display scale for the point theme with the
labels.  When I zoomed in, it turned off the labels and left my original
theme.