Well, I'm going to post my own reply because I think I figured it out.... so this is for anybody else having this problem.
As soon as you link a file a certain way you can't change the settings, so you have to detatch the file and then reattatch the file using the proper settings. Under the FLM, go to Presets and hit last settings and then go to modify. A window will pop up and then you have to change the 'Derive AutoCAD Primitives by:' window to read 'Layer' (I think the system default is 'Layer, Block as Node Hierarchy, Split by Material'. Once the file link is set up like this you're good to go 🙂