Thank you for the reply. The only difference in settings was that I had the Connection Line Tolerance set for .1 and this must have caused LC to think the sections were connected. When .001 was used, the image was perfect.
There's still a nagging problem - off and on - with this and other DXFs. For this particular DXF, LC says "Loop sensed as Open" for the center circle, which can't be correct. It's chain 1 here and it has two entities. But then the perimeter circle has two entities and an outer offset is created.
If I exit LC and start all over again, I can get an offset for the inner circle. Strange.
In any case, thanks for the setting!