The offset Tolerance is there to allow you to set a "Search Radius" when elevating lines using different methods- for example you may have Lines and Text as the source of your elevations - the Offset Tolerance allows you to not search too far for the piece of text to use (that way it will limit the Text Search to e.g. 1' from the line (when I did the Beijing Airport there were thousands of Grid Intersections where they provided specific Elevations for the saw cuts - the elevation was always e.g. E and N of the EW / NS Grid intersection and we wanted to find the text and elevate the lines - that works great until the last text for a line is offset from the end of the line and there is no intersection to tie it to. So in that case it elevates the line where the text insertion point is and that may be just off the end of the line and eg right of the line. In this scenario we do not know that the text is in the wrong location and we told the software to use it because it is in the search radius of the end of the line - so we actually place the elevation at a station beyond the end of the line.
This is really a Data Prep issue - you have to be aware of the tool and how it works and be sure to set up the data correctly before running the command, otherwise you can get undesirable results - the variations on CAD Data are so large and the permutations so vast that we cannot possibly catch all of the issues with automated tools. You do haveto inspect the results to determine whether or not you got what you wanted. To ensure that it doesnt happen you could
a) Make the Search Radius smaller to ignore the text (but then you get no elevation)
b) Extend the line fractionally (but then you have a longer line than you maybe need)
c) Move the text so it is next to the end of the line (this is the best option, then the Text is used to elevate the correct point
We do trap a lot of things, believe me we changed these commands a lot while I was doing the airport model as we found all kinds of weird scenarios that we now trap, but there are still many potholes you can fall into with this type of CAD Data and these types of automation routines. If the text has Leader Lines that helps because the Leader at least points to the correct location - it is these free hanging text items and interpolating where they belong is the trick
There are times also where being able to add a Height on a Linestring beyond the end of the line without having to extend the line is helpful, just the other day you shared a video of a Parking Lot where you were creating lines for Lanes or Centerlines that could stop one side of an island but have an Elevation Point on an "extension to the line the other side of the island where you have a catch basin or similar - that saves having to create Lines that will then cross each other and create other surface problems, while adding a VPI that gives the real slope to the end of the line.
Not saying this is right or wrong, however there are many variations here and automated elevate commands should be used cautiously because they will interpret the results based on what you give it - they don't know that you picked an incorrect piece of text or that the text should really be next to the line at a specific location, they just use specified rules to generate an answer.
General Rule - have the offset at 0 unless you are searching for Text and then use an Offset Tolerance. If you are elevating Lines Using Crossing Lines etc you should have the offset tolerance set to zero unless you feel that some of the lines should touch or cross but may miss / fall short in which case either Trim / Extend all the lines before running the command or use the Tolerance (but use it wisely) - noting that lines that come close to each other if inside the tolerance will interpret elevations from each other. Zero Tolerance is safest bet, then come back to those lines that failed and try to work out why and either fix them and then elevate or use the tolerance wisely on a small selection set.
Alan