This might be a case where component is locked at template level so u need to configure at template level only go to template editor and configure it.. On the other hand if inheritance is involved try cancelling the inheritance then you can configure it.
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One solution could be you provide regular expression instead of "/content" which serves your purpose something like restrict the selection up to level Two.(Not sure about this) Another one can be you let author select content path up to any level, but while saving it you reduce path up to level 2. T...
Content Fragment templates should not be avoided ..Make changes in the dialog of CF template and those changes will reflect in your CF Editor.For reference check WE Retail CF templates(/conf/we-retail/settings/dam/cfm/models/we-retail-store-info).
It seems there is an issue with your template.Try creating experience fragment with OOTB(We-Retail Template) once. Error log might be having information about the issue dig through that .