I think this is a bug. If you have 3 levels of nested blocks, the lowest level block will not turn off with it’s layer. Objects inside that block will turn off with their own respective layers, but the block will not turn off with its layer. To try to illustrate more graphically:
Block 1: Layer Block 1
Block 2: Layer Block 2
Block 3: Layer Block 3
Objects: Layer Objects 3
The objects within Block 3 will turn off when “Layer Objects 3” is turned off, but not when “Layer Block 3” is turned off.