Now, when I am opening a .dwg file in archicad that is drawn with lines existing at various elevations, and archicad is making the drawing information 2d, does that mean all of the lines are being 'flattened' to 0' elevation (or whatever the pre-set elevation is for the particular story I'm xrefing )??All 2d lines in ArchiCAD have no 3d information associated with them. They are nowhere in 3d space. You shouldn't think of them being at a particular height or level. You don't have to (and can't) 'flatten' them.
So if the survey dwg file has all the lines drawn at 670-680', when I bring the file to archicad it automatically brings all the line work to the story's elevation and does not require me to lower the xref by 680' to get it to 0?
If you don't need control of the individual layers, have you thought about placing the DWG as a drawing onto the floor plan, rather than opening it or XREFing it? It might be simpler. You can put it on a layer and turn the whole thing on and off, you can still snap to the individual line and edit the boundary, like any polygonal shape, to hide bits you don't need to see.
I'm assuming all you want to do is create the terrain for the site, so I'd place the DWG as a drawing, trace over the top with the mesh tool, add individual points or contours and adjust the heights as necessary. (I guess the site DWG would have the heights written on it, so use those to manually type in) Then hide or delete the DWG.
If the site is large or you will be using 3d DWGs often, it may be worth investigating Architerra here, as I believe it can automatically convert 3d DWG/DXF into meshes.
Still looking?
