Mx v8i SS2 Reference problem - Won't merge into master

Dear colleagues, 

I try to merge a reference into my drawing, in order to convert it's elements to Mx strings. 

The reference is a small (251K) converted to R14 .dwg AutoCad file, containing a few lines but no blocks or other complex stuff. It loads OK as a reference but when I try to Merge Into Master, click outside the reference list box in the drawing area, it does display the 

dialog but if I clikc OK the bottom of the screen shows 

and no reference has been merged. I'll workaround this, but it's still bothersome. Any clues? Kindest regards, Robin