Jim,
I didn’t mean imply that you don’t know how to nest a project, just that I do it all the time and never heard of the error you were describing.
I did download your zip file and tested it out and the audio was indeed missing. Then, I opened your project file (instead of nesting it) and saved it to a new project name copying the media with it. When I nested the one I save it worked correctly. Something is clearly different between our two computers.
I wish I could help you out, but this is over my head.
Jeff
http://www.narrowroadmedia.com