Bonita,I think a lot depends on the size of the development department and the talents of its staff. If I had a large talented staff, I would much rather rely on their grant-researching and writing ability than that of a "hired gun". The internal grant-writer can also be pulled away to assist in other areas, like special events, when the need presents itself.
Similarly, when I was a one-person development office, I preferred to write my own proposals, because I knew my own organization better than any "outsider" and could more readily respond to any questions posed by a prospective funder. Believe me, handing big grant checks to your boss is job security! If you had to hire an "outsider" to produce those checks, your boss may begin to wonder why he needs to pay you?
Also, An internal grant-writer is less likely to employ "Swiss-cheese" proposals, identical copy, with only client-specific names inserted, where appropriate. I don't want a proposal that I thought I had paid for appearing on a foundation officer's desk two years later with some other organization's name on it!
Just my thoughts,
Rick