Yes that's what I would have thought -- that it would try to charge in USD, and let my bank convert.
See the attached image -- I entered 10000 L$, that would be $41.33.
Linden Labs would charge me 34.78 GBP for this transaction (and when I buy it, that's really how much they charge).
The currency market rate conversion is 31.06 GBP. That is a difference of 12% !
I haven't tried PayPal, as paypal also has bad exchange rates, although probably not as bad as 12%