I'm using the latest KDS - 2.0.0.
Generally I have only one project active at a time. I can try going back to an empty workspace and re-importing this one to see if it makes a difference (tomorrow).
I started a project at C:\Projects\USB-MSD-2. When I realized that this was not an appropriate name, I renamed it and changed the name of the directory in Windows. (Not sure of the exact order there.) When I finished writing my code and got a clean compile, I went to debug it. For whatever reason, the was no debug configuration in the list for the SEGGER J-Link. So, I created a new one and worked from there. It wasn't until I went to set a breakpoint that I ran into the problem.
In an attempt to correct this, I deleted the other debugger configurations that were there (PE and ??), but the problem remained.
When the message pops up, I am given an opportunity to select the file directly, but that seems to be a temporary thing. It's not long until the message pops up again.
Knowing my luck, I rather doubt you'll be able to replicate it, but...?
Thanks