md repro
cd repro
dotnet new sln
dotnet new classlib -o lib
dotnet sln add lib
cd lib
dotnet workload restore ..\repro.sln

Updated advertising manifest microsoft.net.workload.emscripten.net6.
Updated advertising manifest microsoft.net.sdk.aspire.
Updated advertising manifest microsoft.net.sdk.maui.
Updated advertising manifest microsoft.net.workload.mono.toolchain.current.
Updated advertising manifest microsoft.net.sdk.ios.
Updated advertising manifest microsoft.net.sdk.maccatalyst.
Updated advertising manifest microsoft.net.workload.mono.toolchain.net6.
Updated advertising manifest microsoft.net.workload.emscripten.net8.
Updated advertising manifest microsoft.net.workload.emscripten.current.
Updated advertising manifest microsoft.net.workload.mono.toolchain.net8.
Updated advertising manifest microsoft.net.sdk.tvos.
Updated advertising manifest microsoft.net.workload.mono.toolchain.net7.
Updated advertising manifest microsoft.net.sdk.android.
Updated advertising manifest microsoft.net.sdk.macos.
Updated advertising manifest microsoft.net.workload.emscripten.net7.
Warning: Workload garbage collection failed with error: An error occurred trying to start process '"C:\Program Files\dotnet\dotnet.exe"' with working directory 'D:\temp\repro\lib'. The operation was canceled by the user..

Successfully updated workload(s): android aspire ios maccatalyst maui-windows wasm-tools wasm-tools-net7.

Unhandled exception: Microsoft.Build.Exceptions.InvalidProjectFileException: The project file could not be loaded. Could not find a part of the path 'D:\temp\repro\lib\lib\lib.csproj'.  D:\temp\repro\lib\lib\lib.csproj
 ---> System.IO.DirectoryNotFoundException: Could not find a part of the path 'D:\temp\repro\lib\lib\lib.csproj'.
   at Microsoft.Win32.SafeHandles.SafeFileHandle.CreateFile(String fullPath, FileMode mode, FileAccess access, FileShare share, FileOptions options)
   at Microsoft.Win32.SafeHandles.SafeFileHandle.Open(String fullPath, FileMode mode, FileAccess access, FileShare share, FileOptions options, Int64 preallocationSize, Nullable`1 unixCreateMode)
   at System.IO.Strategies.OSFileStreamStrategy..ctor(String path, FileMode mode, FileAccess access, FileShare share, FileOptions options, Int64 preallocationSize, Nullable`1 unixCreateMode)
   at System.IO.Strategies.FileStreamHelpers.ChooseStrategyCore(String path, FileMode mode, FileAccess access, FileShare share, FileOptions options, Int64 preallocationSize, Nullable`1 unixCreateMode)
   at System.IO.FileStream..ctor(String path, FileMode mode, FileAccess access, FileShare share)
   at Microsoft.Build.Internal.XmlReaderExtension..ctor(String file, Boolean loadAsReadOnly)
   at Microsoft.Build.Construction.ProjectRootElement.LoadDocument(String fullPath, Boolean preserveFormatting, Boolean loadAsReadOnly)
   --- End of inner exception stack trace ---
   at Microsoft.Build.Shared.ProjectFileErrorUtilities.VerifyThrowInvalidProjectFile(Boolean condition, String errorSubCategoryResourceName, BuildEventFileInfo projectFile, Exception innerException, String resourceName, Object[] args)
   at Microsoft.Build.Shared.ProjectFileErrorUtilities.ThrowInvalidProjectFile(BuildEventFileInfo projectFile, Exception innerException, String resourceName, Object[] args)
   at Microsoft.Build.Construction.ProjectRootElement.LoadDocument(String fullPath, Boolean preserveFormatting, Boolean loadAsReadOnly)
   at Microsoft.Build.Construction.ProjectRootElement..ctor(String path, ProjectRootElementCacheBase projectRootElementCache, Boolean preserveFormatting)
   at Microsoft.Build.Construction.ProjectRootElement.CreateProjectFromPath(String projectFile, ProjectRootElementCacheBase projectRootElementCache, Boolean preserveFormatting)
   at Microsoft.Build.Evaluation.ProjectRootElementCache.GetOrLoad(String projectFile, OpenProjectRootElement loadProjectRootElement, Boolean isExplicitlyLoaded, Nullable`1 preserveFormatting)
   at Microsoft.Build.Evaluation.ProjectRootElementCache.Get(String projectFile, OpenProjectRootElement loadProjectRootElement, Boolean isExplicitlyLoaded, Nullable`1 preserveFormatting)
   at Microsoft.Build.Construction.ProjectRootElement.OpenProjectOrSolution(String fullPath, IDictionary`2 globalProperties, String toolsVersion, ProjectRootElementCacheBase projectRootElementCache, Boolean isExplicitlyLoaded)
   at Microsoft.Build.Execution.ProjectInstance..ctor(String projectFile, IDictionary`2 globalProperties, String toolsVersion, String subToolsetVersion, ProjectCollection projectCollection, Nullable`1 projectLoadSettings, EvaluationContext evaluationContext, IDirectoryCacheFactory directoryCacheFactory, Boolean interactive)
   at Microsoft.Build.Execution.ProjectInstance..ctor(String projectFile, IDictionary`2 globalProperties, String toolsVersion)
   at Microsoft.DotNet.Workloads.Workload.Restore.WorkloadRestoreCommand.RunTargetToGetWorkloadIds(IEnumerable`1 allProjects)
   at Microsoft.DotNet.Workloads.Workload.Restore.WorkloadRestoreCommand.<>c__DisplayClass3_0.<Execute>b__1()
   at Microsoft.DotNet.Workloads.Workload.WorkloadHistoryRecorder.Run(Action workloadAction)
   at Microsoft.DotNet.Workloads.Workload.Restore.WorkloadRestoreCommand.Execute()
   at System.CommandLine.Invocation.InvocationPipeline.Invoke(ParseResult parseResult)
   at System.CommandLine.ParseResult.Invoke()
   at Microsoft.DotNet.Cli.Program.ProcessArgs(String[] args, TimeSpan startupTime, ITelemetry telemetryClient)