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This seems like an arbitray restriction and in many cases necessitates changing directory structure so the desired code can be used within eclipse.
Projects can have overlapping portions by using linked folders. New > Folder > Advanced. There are a number of technical difficulties with overlapping project roots that have been discussed extensively in the past.
Reopening for consideration.
I would like to point out that some plug-ins have problems utilizing linked resources. For instance, the CDT's Managed Make functionality does not support linked resources well. Other plug-ins also cannot work with source code in linked resources. https://bugs.eclipse.org/bugs/show_bug.cgi?id=72589 https://bugs.eclipse.org/bugs/show_bug.cgi?id=69597
Investigating...
Released. Project locations can now overlap in the file system.