AutoCAD 2013 :: Tool Palette Not Exploding Properly

I have a series of block references in a tool palette which I want to explode once inserted. Simple I think, just set the 'explode' property on the tool palette icon.

Wrong. What actually happens is that in my case where the block refernce is simply two blocks inserted on different layers, the tool palette will insert onto the layer specified, and then explode, moving each block from its original later, onto the layer the host block is inserted on.

For example:

BlockRef_A consists of two enties:
BockRef_1 on Layer1Blockref_2 on Layer2
 
Using the tool palette to insert and explode using the 'use current' for the destination layer, I get the following:

BlockRef_1 on 0
BlockRef_2 on 0

Both the destionation layer (Layer1 Layer2) already exist in the target drawing. 

It looks to me like autocad is importing the block, exploding it, moving it to the required layer.

This doesn't happen to any other entities, if there's a block that consists of a mix of parts, only the block references within it get moved to the destination layer.

ACad, MEP, 3DS Max
Windows 7x64
X5482 @3.2Ghz 8Gb Ram
Quadro FX1700