That is a unusual. U-Carolina, for example, publicly admits that it favors its under grads in grad/professional school applications. The UC’s are just the opposite. They want you to go elsewhere. Boalt could fill a lot of its class from Cal undergrads, but purposely does not.
Of course, it comes down to how big the state and how many other great colleges are contained within its borders. If UVa was to favor its own in a big way, it would by definition, be disfavoring those from William & Mary and VaTech – which would be political suicide in that state.
Of course, all other things being equal – and they rarely are – HLS would favor its own grads. But HLS is not going to accept a Harvard undergrad with a 3.4 over a UVa/other grad with a 3.7 (assuming same LSAT).