Welcome to the forums……..
You seem to be having several problems which I am afraid may be the way you are using the program and controlling your video files.
I’ll try to explain each problem you have mentioned.
Video Studio Projects
First when we insert a file to the timelines, Video, audio, image etc the file is represented by a virtual clip, a thumbnail, this is linked to the files location on your hard drive. If you these files in any way then Video Studio will loose that link, then request a Re-Link. You then browse the hard drive to find the original inserted file.
Video Studio will request a re-link for files that have been deleted, re-named or moved.
The project is saved as a VSP Video Studio Project file, this file is not a video file it is a project file containing the edit information.
This is a process where we can add a project file, a VSP to the timeline, adding one VSP inside another, it will display as though a video file but can confuse especially if you are unaware of doing this.
Nesting projects can cause many problems
I do not recommend that anyone uses the nesting process, instead render the individual projects to a new video file, then add the video file to another project.
It would appear that you have nested a VSP inside another otherwise you wouldn’t have seen the error “The Timeline contains one or more VideoStudio project file clips. Smart Package cannot proceed."
If you have done this by mistake then the nesting problem could get complicated
You need to identify the files you have used in the project, open your project.
Go to Settings-Preferences-General tab – Clip Display Mode to File Names only, your clips in timeline view will display the file names.
If you find a VSP, Right click the clip and select properties then take note of the name, this also shows where on the hard drive the VSP is saved to. Do this for all VSP’s you find.
Now open these VSP’s and again view the content, hopefully you do not find any nested VSP’s.
Once you have identified a project that does not contain a nested VSP you need to convert it to a video file, Share Create Video File, the settings you choose depends on your original video files properties and what you are intending to make.
Ok its getting a little involved, so tell us what you have found.