I read about a couple items in a thread at RFO that could affect creating a Local File in addition to to what I've mentioned in the past.
Revit appends our username to the local file it creates for us. That addition could cause a local file's name to exceed the maximum number of characters, which is 260 (file name and path). That's 256 plus the four characters associated with the drive letter, for example C:\ (space/null after the back slash).
The other possibility mentioned is having Auto Off-line Access enabled.
Gosh computers and software are fussy buggers!
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