Solved - had extra leading '/' in some path names in the environment. Like: 
//thing1...

Fixing that made the problem go away.

>From: "John Smith" <[EMAIL PROTECTED]>
>Reply-To: [email protected]
>To: [email protected]
>Subject: [Angstrom-distro-users] Problem baking libtool-native-1.5.10
>Date: Mon, 16 Jul 2007 10:21:58 -0400
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>Hello:
>
>I'm experienced with OE and have been building gpe-image. I tried Angstrom
>and ran into a problem early on building libtool.
>
>During do_compile get an error while running ./config-status --recheck. 
>Says
>- error: source directory already configured run make distclean there 
>first.
>
>Development platform is i686 Ubuntu building against current
>org.openembedded.dev meta-data. Have built this same version previously
>using gpe-image.
>
>Any thoughts?
>
>Thanks in advance.
>
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