Quartus issues picking up VHDL package files in libraries

The auto-discover for fles is very basic; I think they basically want you to add all files to the QSF with the Add Files option or Tcl... Looks like the docs could be more clear on this point.

When you have a direct entity instantiation, you must add the instantiated entity to the project source file list. It supports auto-discovery only when you instantiate indirectly using a component.

But the libraries can still help you manage multiple versions of files or files with same name etc... The software will look in an explicit library namespace first before searching the default library "work". For example, if you refer to mylib.mypkg, Quartus II will look in mylib for a primary design unit called mypkg. If mylib doesn't exist or doesn't contain mypkg, Quartus II will look for mypkg in the library "work". There is some discussion about how libraries can help in the QII handbook: http://www.altera.com/literature/hb/qts/qts_qii51008.pdf, page 12.