The scheme, by local practice Lionel Gregory, which would see the construction of two five-storey blocks, faces heavy opposition from existing residents of the Leon Krier-masterplanned village.
These locals are planning to use the inquiry, which is being held in Dorchester, to publicise their problems with the Duchy of Cornwall-backed scheme.
Developer Woodpecker Properties has twice had its plans for the Jubilee Court site rejected by West Dorset District Council planning committee.
The first application, for 31 flats, two shops and parking, was rejected in August last year. Residents successfully argued the plans were double the number of homes recommended by deputy prime minister John Prescott for similar sites.
Lionel Gregory went back to the drawing board and resubmitted with a plan for 26 flats, two shops, four office units and parking. But this was also rejected in May.
A spokesman for the residents likened the inquiry to a 'David and Goliath' situation.
He said the case was a watershed and could set a precedent for the rest of the country. 'It is because of the national importance of this scheme that we were approached by a solicitor who helped us find a planning barrister and they have assembled a legal team.
'Without that assistance, I'm pretty sure we would have been sunk without trace in this David and Goliath situation,' he added.