Kerry,
You will find that in the manual i just posted i have said you should draw, export, import, and have Mach3 Turn set for the same mode.
I had trouble duplicating what you and Russ did since it wouldn't change no matter what mode i put mach turn in.
I take it you saved it as a version 2007 dxf.
A few other programs identified it as 3d dwg, 2000 would not import it.......
I am thinking that 2009 puts some crap into the dxf and causes problems .......don't know for sure....just a guess
RICH