See also [1461875].
If I create a project with the same name as a subdirectory of the selected location, I get a dialog saying it will overwrite an existing file. That's not the case, though, because the new file will have a ".xml" extension, while the existing directory does not.
The workaround is to explicitly write the ".xml" extension as part of the new project's name.
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Fixed as of revision 4488.
I had already fixed [1461875] a while ago.