@DTS Engineer Ed Ford, thanks for your kind reply. I am continuing to get the error with Xcode 26.0 beta 5 having fully updated my system. It's possible that I'm doing something wrong, but the error is ambiguous so it's hard to troubleshoot.
In an earlier Xcode beta I saw a message about the icon file having an issue with transparency but it disappeared by itself after an update. If I can, I will try a new, blank, icon, in case the icon is somehow corrupted.
To help me try solutions, is it possible to share some insight as to what can cause this issue behind the scenes for projects using Icon Composer files? Could it be corruption in the files, or files missing from the archive, or possibly remnants of the old icon still in the project?