In some cases, the sub directory "__projnav" is not created in the design project directory on UNIX platforms.
The "__projnav" directory is used by Project Navigator to write error message files, log files, and other process related files (such as options files), for a given process. When the "__projnav" directory is not present, the ".err" files cannot be created, and this causes the FATAL ERROR message.
To work around this problem, manually create the "__projnav" sub directory in the project directory.
This problem has been fixed in the latest 7.1i Service Pack, available at:
http://support.xilinx.com/support/techsup/sw_updatesThe first service pack containing the fix is 7.1i Service Pack 1.