Unfortunately...It is a bug....it only happens when:
1. You create a new structure
2. Choose autogenerateId
3. Inherit a structure with no parents.
The validation error is only supposed to happen when you try to create a circular loop of structure inheritance.
Work arounds:
1. Create structure first without inheritance, then edit and add it afterward.
2. Specify an ID
Created a ticket and working on a fix...thanks.
http://issues.liferay.com/browse/LPS-2266At least your understanding and thinking was correct =P
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