Oh, yes, you are right. I should have looked into one of my projects before writing the reply. The settings to use paths relative to project directory or relative to project file are not present anymore in the project settings dialog, whether in UltraEdit nor in UEStudio. Both use now relative paths automatically when possible.
The default is that all project files are with relative paths to the project file. So the project file should be either in the root of the project (= project directory), or like I use for my projects, in a subfolder of the project directory because I only want source files and not additional project managing files in project root directory.
The project file (*.prj) still contains:
Use Relative Directory=1
Relative to Project File=1
With opening the project file and editing the options and of course also all paths, it should be possible to shorten the directories.
I have now tried what happens if I add to one of my projects in UEStudio a subfolder of the project as folder and not as group. UES adds the folder with full path. In my point of view this is a bug. When all files are added relative to project file or project directory, then the folders should be added also with relative paths. Please report this issue by email to IDM support.
Next I closed the project, opened the project file *.prj with File - Open in UES, converted the absolute paths of the just added folder to correct relative paths (relative to project file in my case), saved the project file and closed it. After re-opening the project and looking into the project settings dialog everything looked OK. Files added to this folder are also automatically correct added to the project. A Find in Files in all project files worked, too. I have not tested if building the project with the added folder using a relative path also works because the added folder did not contain source files of my project. However, backup your project file and try if replacing all absolute folder paths in your project file by relative folder paths results also in a working project which can be build/rebuild.