LC's dxf importer is not the best. I never use polylines and all entities are lines or arc's for what i have done.
Some comments on your drawing:
Like Gerry, I also exploded the whole drawing and there were some 500 + items that didn't explode and LC locked up when i tried to import
a ver12 dxf of it. I also took the drawing and did the equivilant in Microstation and the curved lines were converted to arcs and the exported dxf locked up LC.
So I deleted about 75% of the file and LC was able to use it.
I fooled with the tolerance setting in LC but that didn't improve things.
I used CamBam and it had no trouble with the complete exploded ver12 dxf .
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Frankly, I don't know what your going to do with this file or any equivilant one like it for that matter.
There are converters out there but the results most often leave something to be desired. I don't play much in the
"picture" or "image" machining / routing arena. Results from upper end software seems to be satisfactory for the router folks.
If i want a picture done then it will be vector based as i can control what i want to accomplish for the engraving.
I can't comment much on LC's use of bitmaps or images. I fooled with it some time ago and wasn't impressed with it.
BTW, i didn't delete the bird that was in your dxf file.
RICH