Patrick Emin sends us a workaround method to set all of the objects in a file to Bylayer.
"You can use the Laytrans command to perform this conversion. Load the same drawing as the current drawing in the target field, and select the options to assign the layers to the same layer names in the target. This will convert all colors, even those in blocks, to Bylayer."
Notes from Cadalyst Tip Patrol: The Laytrans command is designed to map the layers in the current drawing to different layer names and properties. It is very useful when converting layers of one file to match the layers of a second file. It can help you to maintain CAD standards, or to reformat CAD files from an outside source to meet your company’s standards. This workaround uses the settings manager to reassign all objects in your drawing to Bylayer. If you turn this option off, then the only thing changed is the layer. If the objects are assigned colors by object, they will retain those settings.