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:
Can you send an example with the associated blocks to tech@mcneel.com please? Please also indicate what layer you are trying to turn off if you can. Thanks for the feedback… just trying to reproduce this as you see it.
Sorry, I meant to respond to this a couple weeks ago, but I got tied up with other things. In the attached file, turning off layer: Object 3 makes the smallest box disappear, but turning off layer: Block 3 does not, even though the smallest box is in a block that is on that layer.
@BrianJ in your screenshot the object you have selected is an extrusion, not a block. If you are working in Block 2 and select Block 3, you will see that it is on layer “Block 3”
Thanks for clarifying Jacob and James. I’ve got this issue filed now as RH-23297 for future reference. Thanks for bringing it up, development will need to take a look.