I've noticed a curious behavior when dragging-and dropping references using MicroStation V8i SS3 (08.11.09.397).
I have my default reference attachment settings (MS_RED_DEFAULTSETTINGS) to
When I attach a file using Tools-->Attach in the References dialog, the file attaches normally (i.e. as expected).
If I attach it by dragging and dropping as file from Windows, I get the dialog that asks how to attach it, and when I select any method other than Recommended, the file attaches normally.
If I attach it by dragging and dropping as file from Windows and choosing Recommended, the file attaches with Live Nesting enables 99 levels deep. This is certainly not desired!
Is this a bug? I can reproduce it on other PCs. I did not see a note on this being fixed in the 459 build.
This is working as designed. Have a look at the Help file, go to Help > Content tab > References, Raster Images, and Point Clouds > Attaching References > Attaching References with Recommended Settings
Or, try the following link: http://docs.bentley.com/en/MicroStation/ustnhelp935.html#ie7089