Are you setting the show directory with the icon?
use the RED circle, not the BLUE box.
In xLights 3.6 we had only one directory, the show directory. All media files had to be there, all xml files were created there, all outputfiles.
In 4.0 we started the idea of allowing the media file to be in one place, the show directory a second and the output directory a third.
I wanted the audio directory so that people could point to the existing sound files.
dave wanted the output directory so that the fseq files did not fill up the show directory.
I am not sure we have got this all set up coreectly.
When i use it i just use the RED circle and i put all sound files there (Just like in xlights 3.6)
try that and see if it works.