When turning on the "Library" column in level manager “**External**” will show up as the source of of the level. What does this mean and how can this be removed?
When a level is copied from an attached library or from a library specified by the MS_DGNLIBLIST configuration variable, it is considered to be coming from an external source. If a library containing the level is no longer available, either because it is not attached or because it is no longer specified by MS_DGNLIBLIST, “**External**" appears in the level's Library column in the Level Manager dialog. This indicates that the level is a library level and is not subject to certain modifications.
If you update the level, it will no longer be consider as coming from an external source and the "**External**" designation will be removed.
http://communities.bentley.com/products/microstation/w/microstation__wiki/8861.levels-and-level-libraries