P3D v4 compile error

A good friend of mine is having a problem. When he goes to compile his project as mdl OR bgl.... he gets the message that FSDS cannot find xtomdl. We have gone to preferences and made sure FSDS is pointed to hisSDK... it is correct. This occurs whether looking to FSX or P3D. I even sent him a copy of my xtomdl and we placed it in the same place and allowed overwrite. Same problem.
He has uninstalled and reinstalled FSDS. What gives?
What was found by my friend, and I realized this after the fact, he navigated all the way to xtomdl when FSDS just wants yo to nav to the folder where xtomdl IS. Problem solved.