As far as I can tell, the only way to prevent LAYFRZ from freezing the layer that the xref was inserted on is to ensure that you don’t have “No Nesting” set in LAYFRZ settings (and also to make sure you don’t click on an entity that is on Layer 0 within the xref – see this post for more details). However, I have not noticed LAYFRZ behaving differently when applied to an xref on either Layer 0 versus a layer called “XREF” (I just tested this in 2008). I agree that placing xrefs on a layer named “XREF” is good idea. In addition to this, it is good practice to put your entities on meaningfully-named layers.

So you won’t be able to freeze the xref’s Layer 0-based entities without freezing ALL Layer 0-based entities, nor will you be able to change the color or linetype of these entities. So what happens if you add a second xref that also has entities on Layer 0? These entities will also take on the properties of the sheet file’s Layer 0 – there is no way to differentiate between them as far as the layer manager is concerned.

If you attach an xref to a sheet file, and you want to change the appearance of entities on Layer 0, you have to modify the Layer 0 in the sheet file (as layer 0 does not show up as a nested xref layer). Never create entities on Layer 0, except those which will be turned into blocks. Therefore, the only thing that should ever be created or inserted on Layer 0, especially in xrefs, is xrefs (and these should be overlaid, not attached). Note that Layer 0 does not magically take on the properties of the xref’s Layer 0. It won’t show up in the layer list, because you already have a Layer 0 in your sheet file. In other words, if you xref a drawing into your sheet file, you will not see the xref’s Layer 0 as xrefname|0. Perhaps more importantly, it appears as the same layer in external references. Layer 0 is a “universal” layer, in that appears in every drawing and cannot be renamed. For beginners, it is important to learn how Layer 0 operates. Layer 0, like Defpoints, is a special layer that deserves careful attention.

Creating an xref in autocad