Quartus Pro 24.1 QSYS uses absolute paths

After consulting the tool specialists:

Currently, PD references the subsystem .qsys through relative path if and only if the subsystem .qsys lives under the parent system directory  If not, then use absolute path.
I agree the interpretation that the subsystem .qsys has to live under parents system is weird and plan to fix this in the Quartus future release 25.3 (version stated is subject to change). 
On Windows, if the file is on a different drive, we'll continue to use absolute path. 

Based on the comments provided, it seems that the subsystem cannot be placed outside the parent system directory.

As a workaround, please place the subsystem within the parent system directory until this is fixed in a future Quartus release.

Regards,

Richard Tan