Strange Error in NetWeaver Developer Studio

I am using the NWDS Version 7.0.07, build # 200603240339.

I have a directory on drive D: named 'ABC'.

I created a project (say Project1), and gave this directory as the project root folder. NWDS created a directory Project1 under ABC and all the generated files were placed there.

I then started creating a project (say Project2) and gave the ABC directory as the root folder. NWDS complained that 'D:\ABC and D:\ABC\Project1 overlap'.

I have given D:\ABC as my Workspace. This error looks strange because it is like saying that you can have only one project in one single directory (or even drive). Am I missing out some thing here?

TYA