Hi, sorry for the late response and thanks for the help!

The geometry is more complex then just the point cloud, therefore I imported the geometry first and the point cloud on top of it to SpaceClaim and then created named selections for each point. I'm doing it in 3d because the geometry I was given does have a slight thickness to it. The nodes seem to be in their proper positions on the geometry but I still have that weighting error when assigning displacements in Mechanical. Does the error have something to do with the way I'm importing the point cloud to SpaceClaim?