Pat
I am getting this to work OK - what I do is the following
1) Make a copy of the Custom Takeoff Report Template in a completely different location on my PC - I have a backup folder where I keep all my custom stuff in my Documents folder. I also rename the Template to be eg AS Custom Takeoff Report Template so that it is different to the original - I also remove the Read Only flag on the file that I will be using
2) Now I use the Create Custom Report Template command and give it a name (AS Takeoff Report), a Description (AS Takeoff Report) I select the Custom Takeoff Report as the Report Source Data and then I select my copied, moved and renamed template file as the Report Layout File.
3) I Edit Layout - in my case I added a page header only and then OK to save and close the Layout File. and then OK again to save the Custom report Setup. This sets all the paths on my PC to the correct files.
I now select reports / More Reports and then find my AS Takeoff Report and run it and my report looks like this

Note the Header is added (formatting sucks but that's what you get for speed!) - but it woks and holds all the paths as expected.
I have been meaning to find time to mess with this report myself - would be good to get a take on what needs to be changed from your perspective and try to get a master here that does what we all want it to do. Happy to assist in this process as this is a monster report to mess with.
Alan