This seems to be a side effect of Xcode 16 trying to force the use of project folders instead of groups--and it seems you can't have a folder reference inside a folder. If, however, you convert the enclosing project folder to a group, you can properly add a folder reference. You can then set the folder reference build rule to 'Apply Once to Folder'. The process is far more convoluted and twitchy than before, but at least it seems to work for now.

I'm running on an Apple Silicon laptop, predictive code completion is off, and I still get these warnings. It's very annoying.