I would like to know if a character is elevated, can it draw line of sight to anything on the board? I know that elevated line of sight ignores hindering terrain but can a elevated character see over or through character "Y" to target "Z" for line of sight or ranged combat?

X #YZ

X = elevated character
# = hindering terrain
Y = Character
Z = Target

The rule book says that if line of sight crosses blocking terrain or another character than line of sight is blocked - but doesn't say if being elevated follows this rule or not.

You can see over standard size figures, but there are some other exceptions. For example, if Z has Stealth and is in hindering terrain, then X does not have LoF to Z.

I want to say that blocking terrain will still block LoF between an elevated and a grounded character, so that barrier should work between the two.

It would, yes.

If character "Y" is like blocking terrain for character "Z" on the ground, then why wouldn't it be like blocking terrain from elevated?

Characters are never "like blocking terrain". The can block LOF, yes, but they are characters, not terrain.

Also, there's this line from the Icons rule book (page 21, last line in paragraph 3 under 'Ranged Combat'):

Grounded characters block line of fire only to other grounded characters.

You're right. Barrier is technically considered infinitelly high and is also considered blocking terrain so LoF would be blocked.

Trust me, I know. I learned it the hard way!

Barrier is not infinitely high. It block LOF because it is blocking terrain, but it is just as high as any other blocking terrain: meaning, you can move right over it if you are a flier (or have L/C or Phasing or whatever) and it does absolutely nothing to characters that are soaring.

PL recently told me that, awhile ago, Barrier was ruled differently and that is where the "infinitely high" thing came from. That is no longer the case and it hasn't been for quite some time. I hope you didn't learn it the hard way at all recently; if you did, you got hosed