To solve this is kind of a pain, but here's what you have to do. Go into XML Source view and search for a reference to a floating field that does not exist (this will be in whatever subform you are trying to make into a fragment). Some Designer bug causes the XML to add this floating field reference, which doesn't affect the form until you attempt to create a fragment. Then it blows up.
Hopefully they get this fixed in ES2 or an update.