This occurs because Project Navigator does not properly capture the failed return code of the XPS Tcl command "run netlist" used to synthesize the embedded module. You should observe the error messages reported in the Console window. If the reported errors are fixed in the design, a successful synthesis occurs and implementation or simulation can be run on the design.
This problem has been fixed in the latest 10.1 Service Pack available at:
http://www.xilinx.com/support/download/index.htmThe first service pack containing the fix is 10.1 Service Pack 1.