Let me try to explain what I and maybe others see.
OK I used a previous project which worked. Loaded it, build package, build all and all worked without error.
You might want to be clearer with what you exactly do, because right now, it looks like, "
within the simulator in DevMode you opened and existing project, clicked build package and build all." It might be that I am missing something, but then I see:
I then made a copy of it (the top folder and all sub folders) , replaced my model with the modified model (new model name so that I know it is the latest) and tried again I still get the error.
So presumably, you are still in the same DevMode session, still the same particular project.xml is open and while this build is in the virtual file system, you edit the package sources folder, add a new iteration of the same model with changes and then again, initiate a build operation, while the previous build remains in the virtual file system, is this assumption correct?
Because if it is, I'll observe that you've never applied the clean all function and if that is the case, I would also observe that providing nested asset groups, seems like an extremely appropriate response to a circumstance that almost certainly, is not intended to occur. If for not using "Clean All," after testing and editing a build, when might you use it?
See, I don't do it this way, I set up a build and start placing and if objects are wonky, or I forgot to add a waving flag, or something, I'll trash the entire build, not even leave the project open, back to the basic user interface, if not the hangar. I don't shut down the sim, but I make sure I've do my apelike best to flush the VFS. Not to imply it seems like black magic to me, I'm just superstitious. Then I'll edit my modellib, re open the project and start placing. So I never use "Clean All," either.
But I can offer a placement tip left over from FSX. Let's say you do have a successful build session and you want to save that progress, but later you notice that one of the models, placed many times, such that resetting all those placements would be tedious, is defective in some way. You can edit that model in the modellib and for this, you have to be careful to use the same name and GUID. The next time you initiate a build, that new version will be placed in all the locations.