Setting up to REFEDIT is a two-step process. First you pick the block reference (internal or external) to edit, then you get a dialog that shows you what you picked and allows you to choose to enable/disable unique layer and symbol names (have not played with this) and whether to display attribute definitions for editing. Assuming the reference name is as expected, you would then click on OK, and are prompted to select nested entities.
The entities that you select at this point are the ones on the "original" layers and can be manipulated. Any entities that you do not select are on the locked layer, and can not be edited. If you need to edit all entities, select them all at the select entities prompt.
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David Koch
Member of the Autodesk Discussion Forum Moderator Program