Hi all
At last my summary. Sorry for the delay. I know some of you asked me if I had a solution as you were experiencing similar hassles. And without further delay, here it is:

Seems that the drawing plane of Microstation is limited to about 4 billion by 4 billion drawing units. Obviously, making your units sufficiently small will allow you to map the head of a pin in great detail, but will yield somewaht erroneous results when trying to use Alber Equal Area or Universal Transverse Mercator to map the surface of the Earth.

The trick is to alter your 'resolution'. Our default ration of subintis to master units was 1000:1. We tried 100:1 and it worked just fine. Our accuracy/precision was to 4 decimals (100th of a millimeter) and this has now been changed. We are aware of this change and that it may not suit us, but at least we know about it while having the added benefit of actually using our data!!

For those worried about the data going the other way, we tried it and it's fine. We were hoping to use imported DXF's as a backdrop in Microstation, but it pulls the whole DXF in and then is saved into the DGN. Not a train smash - at least we know about this too.

One minor aggravation is that Microstation appears to have little support for projections, so the data will have to move from AV/AI to DGN for extra data capture. Again, not a biggie.

Now to work out how to classify data in DGN without using levels... Another topic altogether. Stay tuned!!

Thanks to all who replied.

Trevor Ives