The NGCBuild program that is called by the ChipScope Core Inserter tool cannot find the ".edn" extension after it fails to find the ".ngc" extension because it is located in a different directory than the ProjNav files called <design_edif_path>.
To work around this issue, copy the "<design_edif_path>/my_design.edn" file to "./my_design.edn".
This problem has been fixed in the latest 7.1i Service Pack available at:
http://support.xilinx.com/xlnx/xil_sw_updates_home.jspThe first service pack containing the fix is 7.1i Service Pack 2.