Thanks, that did it. I'm still not sure why PE8 saves the file locations with "absolute" drive letters rather then "relative" but as long as I can make it work.
PrE will create links to exactly where you Imported the files from. It has to know precisely where they are, as the media files are not actually imported, but are only linked to. If you Move, Rename, Delete, etc., those media Assets, the program cannot function. As PrE is a non-destructive NLE, it only has the reference to the Assets, and then instructions on what to do with the data extracted from them.
This ARTICLE will give you some more background on the Project files (PREL's), and what they contain.
I use the method that Steve outlined, as I migrate Projects from computer to computer, and set the drive letter in the OS of each computer, so that each external has the same all the time. I started with Z:\ and worked back for each external, and put a label on each one.