All of a sudden all of my layers change to whatever is the current layer. Has anybody seen this before?

Do you mean layers are lost but objects remain, now on current layers.
Never heard of layers changing from to another layer, maybe the Obama effect?

Some weird crap, This started when I imported objects from a clients drawing. When I grip an object it indicates that it is on whatever layer I am currently in but the change properties menu does show that the objects are on the correct layer. So basically I have to go into the properties menu to see what layer an object on. This is Obama effect for sure because I can't even explain it!

A guess - maybe PICKFIRST is not set to 1?