To answer the Question we need to take a deep look at the Isnad (Narrator Chain) of this hadith, as some scholars (a-Shafi'i and abu Hanifa) consider the content as valid based on ahadith such as the one of ibn 'Abbas and the quotes of some sahaba and tabi'yn from Sahih al-Bukhari while the hadith al-Bukhari quotes suggests that the thigh actually is not 'awrah as people saw the whitness of the thigh of our prophet (), see also in Sahih Muslim! This view is one statement of imam Ahmad and the view of 'Ata' ibn abi Rabah, Dawoid a-Dhahiri, ibn Jarir at-Tabari and abu Sa'id al-Istikhari (a shafi'i scholar). Nevertheless the opposite view has more evidences.
This is the narrator chain were abu Dawod is quoting those people whom transmitted the hadith until Ali ibn Abi Talib ()
حَدَّثَنَا عَلِيُّ بْنُ سَهْلٍ الرَّمْلِيُّ، حَدَّثَنَا حَجَّاجٌ، عَنِ ابْنِ جُرَيْجٍ، قَالَ أُخْبِرْتُ عَنْ حَبِيبِ بْنِ أَبِي ثَابِتٍ، عَنْ عَاصِمِ بْنِ ضَمْرَةَ، عَنْ عَلِيٍّ
A first look says that there's an Issue between two narrators, as the verb أُخْبِرْتُ (bold in text) is in passive form and means I've been told by and this person is not quoted, but it has quoted the rest of the chain from Habib ibn abi Thabit حَبِيبِ بْنِ أَبِي ثَابِت. Note that some scholars consider Habib ibn abi Thabit (? - 119a.H.) as a mudalis مدلس even if he was a great faqih of his time.
So here we already have a narrator missing, we don't know him, and don't know his grade of credibility or trustworthiness (Once a Muhadith is hiding a narrator in his chain others begin to investiagte, as the chances are high that this person is not a good reference!)!
This is an indication for tadlees تدليس which is hiding a weakness either in the content or narrator chain of a hadith, a person who do so is considered as a Mudalis, some scholars were doing this only to have a higher sanad (shorter chain) because for example he didn't hear the hadith from his teacher, but from a mate student, so he didn't want to quote his mate and quoted the source of his mates source! This kind of tadlees might not be considered as negative if those people were trustworthy.
This is the major Issue in this hadith. Ibn Majah used the same chain but didn't use the passive form of the verb as if ibn Juraij ابْنِ جُرَيْج (80a.H. -150 a.h: according wikipedia) has directly narrated from Habib ibn abi Thabit, this sounds a bit doubtful, as we know that abu Dawod (in his compilation) seems to indicate that these two people didn't meet or hear from each other the wikipedia entery about both seems to support this! This could be a next step to investigate in the chain.
From the commentary of sunan abi Dawod
AAbadi آبادي in his 'awn al-m'abood عون المعبود (~The aid of the worshiped) discussed other narrators saying:
The intermediary between ibn Juraij and Habib ibn abi Thabit was al-Hassan ibn Dhakwan الحسن بن ذكوان which is considered as a rather weak narrator (al-Bukhari only compiled one of his ahadith, which is backed-up by a similar narration, as quoted in this thread discussing Habib ibn abi Thabit) he is also listed as the #449 narrator in the book الكامل في معرفة ضعفاء المحدثين وعلل الحديث al-Kamil fi ma'rifati do'afa' al-mohhaditheen wa 'illal al Hadith (~The complete in the distinction of the weak narrators and weaknesses in Hadith) of ibn 'ady al-Jurjani أبو أحمد بن عدي الجرجاني
So far the first weakness quoted by Aabadi!
The second is that even if in this case Habib ibn abi Thabit has given a full narrator chain as it seems he has never met 'Asim ibn Damrah عاصم بن ضمرة himself so there has been an other intermediate (2nd tadlees). al-Bazzar البزار said it was 'Amr ibn Khalid al-Wasiti عمرو بن خالد الواسطي, who is matrook (left aside meaning his Hadith is not trustworthy) and even declared as a liar by Waki' وكيع.
The Arabic wikipedia biography of Habib is quoting a statement of abu Dawod
عن أبى داود : ليس لحبيب عن عاصم بن ضمرة شىء يصح
(My own translation take it with care)
"There's nothing sane (sahih) Habib has narrated from 'Asim ibn Damrah!"
So what finally could abu Dawod mean by his comment:
This tradition disagrees with the generally reported traditions (nakarah).
From above I'd say that he means however this tradition might be true the chain which delivers it has more than one issue.
On the fiqh ruling
Even if it was not asked I think it would be beneficial to cover the interpretation of this hadith too.
We may find in hashiat as-Sindi on Sunan ibn Majah حاشية السندى على ابن ماجة this statement made by as-Sindi:
وَلَا تَنْظُرْ إِلَى فَخِذِ حَيٍّ وَلَا مَيِّتٍ أَيْ مِمَّنْ لَا يَجُوزُ لَكَ النَّظَرُ إِلَى عَوْرَتِهِ.
My own translation take it carefully
and do not look at the thigh of the living and the dead means from those you are not allowed to look at their 'awrah.
This means for example a husband could look at the thigh of his wife and vice versa. As you may find in the hadith:
from his father, from his grandfather, who said: "I said: 'O Prophet of Allah! Regarding our 'Awrah, what of it must we cover and what of it may we leave?' He said: 'Protect your 'Awrah except from your wife or what your right hand possesses.' He said: "I said: 'O Messenger of Allah! What about when some people are with others?' He said: 'If you are able to not let anyone see it then do not let them see it.'" He said: "I said: 'O Prophet of Allah! What about when one of us is alone?' He said: 'Allah is more deserving of being shy from Him than the people.'" (Jami' at-Tirmidhi, Sunan abi Dawod, Sunan ibn Majah)
Note that any hadith saying that the prophet () said it is not allowed to be naked in front of his/her spouse has weaknesses which lead the scholars to allow it. Nevertheless it seems that the prophet () has never been totally naked in front of (some of) his wives due to the a hadith attributed to 'Aisha -which seems da'if or even munkar- which was mentioned in ibn al-Humams ابن الهمام fath al-Qadir فتح القدير (a commentary on al-Hidaya -in Hanafi fiqh-) without quoting any source saying that neither the prophet () saw anything from her nor she did, while we know that he bathed with some of his other wives.