When writing LOCI I used crafty wording. Instead of saying it was my "top choice" I skirted the issue by saying every school was at the "top of my list." or something along that vein. Which was not a lie. But, I think many of you take this issue too seriously.
"Second, it gives your undergraduate institution a bad reputation when you lie like that. From that point on, an admissions officer who sees a file from another student from your undergrad college will think, "Hmm, some kid from this college lied to me last year about his intentions and made my job a tad more difficult. I'm not too keen on this candidate from this same college."
That is pretty absurd thing to worry about if you ask me. Even if I did attend a small school, other student's future applications would be one of the last of my concerns. No offense. Besides, I highly doubt that unless you go to Smallest TTT University, that this would be a concern of any admission officer.