JC,
Thank you very much for the response/verification.
The situation is then, just as I expected, not a bug but user error caused by my missing this knowledge in the manual.
Since I wrote the post, and assuming map entities no longer work with LOD steps, I found a work-around by exporting the prefab of blocks as an MDL7 file.
What was my map entity is now a model and therefore the LOD stepping works similar as with A6 map entities.
I am pleased with the export options in WED... thanks for adding that.

Say... I have been wondering if you received my e-mail inviting you and your team to download our Whistler project and let me know your thoughts???
Did you get that e-mail???
And if you reviewed the project... What are your thoughts???
Thanks again.
Regards,
Paul