Combine is the incorrect command to use. That just gathers individual 2D lines into a group.
Uncombine your lines, then use Close. This will create a polygon, which is what you need to change to a board outline.
Thanks David! I can now make it a board outline. Sometimes I get stuck on the smallest problems.
I had a similar problem Yesterday. (Pads Layout Version 9.2.2)
I made a 2d line rectangle. Then tried to change it to a keepout. It should work, it has in the past but it would NOT allow the change (All options were grayed out).
Gave up and saved as-is. Closed and reopened Layout and the change worked properly. Go figure....
Regarding your board outline problem, try mirroring it to a open area of the project. Sometimes tiny leftover segments are hiding under the board outline, confusing Layout. Select/delete everything in the area then mirror the outline back into the cleared area.
Pads only allows one board outline, make sure any old ones are deleted before trying to make a new one from your DXF.
I will keep this in mind as I go on. I have had all kinds of problems of this kind of nature over the past 3 years. Sometime I will ECO the layout to a new file and my problems are fixed. Part of the fun I guess, haha.