Hi Paul,
Can you have them verify that when they are placing the PI, they are using the Horizontal Curve Set > Add PI command to add PIs to the alignment? Also when creating the line either the Pencil Mode needs to be set or they need to have the Ink Mode with Delete Ink turned on. I am sure you ahve checked these settings but I want to make sure we can doublecheck the process they are doing.
You mention this is in a different office but have you tried sending them a dgn file created from your seed and the preferences from you machine. I know you may be working on a shared drive, but perhaps getting the files saved out locally will help determine if the problem is with the files they are trying to use in that office or the program itself.