Do two-toed sloths live in the understory?

No, in fact that two toed sloth or any other sloth lives in the canopy. If the slothes lived in the emergent layer, their enimies would find them an kill them. The understory is where all the jaguars live and that is also a meat eater and a enemy to the sloth. The forest floor is not a good idea because slothes eat fruit and leaves. They do not eat plants out of the ground.