CAD tip # 6119:

This problem is usually caused by:

1. Inserting the dynamic block with non-uniform scale X-Y-Z (different scales in the individual axes) -- such blocks cannot make use of the dynamic functions
2. Non-standard edit or transform operation on the block - e.g. with an add-on application (which does not count with "dynamic" versions of blocks)
3. Nesting dynamic block inside another block or xref
4. Processing DWG files in a non-Autodesk application -- applications like IntelliCAD, ZwCAD, ProgeCAD, Microstation, DWG Editor, etc. do not work with the official (genuine) DWG format and they may damage the drawing contents
5. Saving the drawing to a too old DWG or DXF format (e.g. R14) and reading it back
6. Rotate/align - rotation (or other transformation) of a dynamic block located on very large coordinates may cause rounding errors which result in temporary loss of its dynamic functions