Yes, something is wrong in your drawing with UCS, so I set UCS to World (WCS) - as XY plane of the current UCS was parallel to XY plane of WCS, nothing changed in view - and have managed to flatten your drawing (see attached).

BTW, there is another way to "faltten" drawings containing simple objects as lines and circles:

You can change Z value for endpoints of lines and centers of circles to 0 (zero) using Properties palette.

Just select everything you need to flatten, look at the Properties palette, select type of object you need from dropdown list:

Of course, you need to adjust UCS too before using method.

Maxim