This works well for InDesign templates created in CS5.5 and before. However, for templates that have been converted from CS5.5 to CS6, this functionality does not work. All images are fit to frame in the output pdf/jpeg irrespective of the fitting option I apply to the frame.
I came across an old thread regarding this issue in InDesign itself (though it is unanswered).
If anyone has faced similar issues, would be great to know if there's any workaround or a solution.