Being new to Mach and LazyCAM, I constructed a simple example of a rectangle with a pocket, and an outside offset.
The code only runs correctly if I un-apply the Soft Limits command button. I believe it has something to do with the Z
because the first movement that occurs is that the Z goes up to the 0 position, rather than staying where I located it
on top of the work piece.

I would like to Z down to the workpiece, then perhaps Z up 0.100", rapid to the origin, and come down to being cutting
the piece. The code works correctly however, the Z works relative to the 0 position and not relative to the positioning on
top of the workpiece.

I am attaching the *.tap. code file for this test file.

It sounds like you are getting confused between Machine Z Zero, and workpiece Z Zero. If you have limit switches installed, then Homing the machine should be set up to reset to Zero (Machine Zero) during the Home All Axis operation. Everything in Mach is relative to this, because this is what tells Mach3 where each axis is physically located. Then, what I do is manually Jog the machine on each axis until the bit is located directly about the lower-left corner of the actual workpiece, and (on the Z axis in particular) jog the bit down over a piece of paper, stopping just shy of contact. Switch Mach3 to the MDI screen, and begin entering in the MDI input line: Z-0.002, then checking the piece of paper like a feeler guage, until the bit is "just touching" the paper. I then switch Mach3 back to the main screen, and click on X Zero, Y Zero, and Z Zero. This tells Mach3 where to find the actual surface of the workpiece. It sounds like you are NOT performing this all-important step, if you are getting Soft Limit errors. Because you have not yet set up the Work Offsets, Mach3 thinks that the Machine Zero coordinates are where you are attempting to begin your program from. Which are ALREADY WITHIN THE SOFT LIMITS RANGE, before you even begin! Hope this helps!