R1 is the name of one of PBP's system variables.
On the xxJ50 family, Microchip added the R1 bit name to the P*.inc files which conflicts with PBP.

It's not really a bug in either MPASM or PBP, but it does cause some problems.

In PBP3, new header files were created (c:\PBP3\DEVICES\*.MPASMINC) that are used instead of the normal P*.inc files.
That allows PBP to get around the problem without making everyone edit the P*.inc files in their MPLAB installation.

For older versions of PBP, you will still need to edit the MPASM P*.inc files like you figured out.
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The Overwriting Previous Address error has also been improved upon in PBP3.
You no longer need to comment the default configs from the *.inc files. Using the #CONFIG block automatically overrides the defaults.