Here's a riddle for you about blocks within a drawing file.

How would it be possible to have a block in a drawing file that shows up in the insert dialogue box and in the Design Center, but you can't insert it with either utility?

Answer; Name the block using ".dwg" as the final four characters.

Try this, create a block, that cannot be inserted, using your typical method.  Open the RENAME dialogue box and rename it with ".dwg" as the final four characters.  Now, try to insert it!

Another scenario to create this same problem would be to open the Write Block dialogue box, choose the browse button to place the objects in a folder as a separate file, copy the name you choose to the Windows clip board and cancel the dialogue box out.  Now, re-enter the Write Block dialogue box and paste the file name in the name area and complete the other criteria within the dialogue box, without going to the browse for file sub-dialogue box.  This will create a block with the .dwg extension in the current file and you can't insert it.

Simple fix, use the rename command to rename the block without the .dwg extension.