I have a background investigation (sound scope) currently being conducted on me for one of the DOD intelligence agencies.  They tell me they will have to do a polygraph.  

What type of polygraph does DOD do?  Are they as ruthless as the CIA with their questions?  Do they do the psych exams that I've heard the CIA does?

The above info is partially inaccurate.
If the DoD agency you are refering to is NSA/CSS, and you are applying for a position requiring a TS  /SCI clearance, be prepared for both a CI poly and a full-scope lifestyle poly.  Unlike the CIA, which divides this polygraph over two days (one for CI, one for lifestyle), The NSA will do it in one sitting.  The exam will be divided into several sections:

1) the veracity of your security forms

2) counter-intelligence

3) drug-use

4) any other illegal activity that you have engaged in, regardless if you were caught or not.

However, for the most part the test will be conducted in a professional manner.  Prior to being hooked up, you will know ahead of time what you will be asked and you will have gone over everything with the polygrapher.

Whether or not the polygraph is accurate or a valid means of granting security clearances aside, the above  description is what you can expect.

If you are applying for secret clearance (as opposed to top secret) with another DoD agency, you will not be required to take a poly.

hope this helps