Click on the arc or circle to dimension. The radial dimension is now attached to the cursor displaying the dimension. The command prompt reads:
Give Dimension Position:
As you move the cursor the dimension slides around and will flip outside/inside the arc/circle accordingly. You will see that the dimension line extends to the cursor position so it is possible to create the dimension in any position. Simply click to accept the position of the dimension.
To edit a Radial dimension see Modifying/Moving Dimensions.