Do they understand that? I think they believe those options are worth more than they really are.
The situation the OP is referring to is when the founder decides not to sell the company or IPO, or makes a poor decision about when. With the former, there is no liquidity and stock in a private company with no liquidity or profit sharing is pretty useless.
If a company takes VC investment, it is basically committing to sell or IPO at some point (VC wants control to ensure this), ensuring the options will at some point be liquid. So, technically, having a VC with board control could be a good thing in some situations to ensure that the founder doesn't get any ideas about building a "lifestyle" company and that everyone gets a payday at some point.