In addition to what my esteemed colleague Peter offered, I'll add this.
The image shows that you have an apostrophe present. Perhaps try renaming things so the apostrophe isn't present?
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I had some issues with the AIR search involving some illegal characters also. The RH8 search is rather picky.
I agree with Peter that you should make sure you have the RH8.01 and 02 patches in place.
But since the root cause of the problem is the illegal characters in the RH7 project, if I were you I's go there and make all the changes BEFORE trying to import anything.
If any of the RH7 folder names have the illegal characters. the imports will not work.
Hope that helps
THANK YOU EVERYONE!!
The problem was indeed that apostrophe in the name of one of my subfolders, not an actual file name. So, I just created a brand new project (sans apostrophes) and imported my HTML files into it with no problems.
Now, I know...RH8 seems more sensitive to special characters than RH7.