@Kiwidude,
You are right about all issues mentioned. The template was only meant for Windows and as a result, you have to edit the paths to suit your installation. (The Joys of DOZE). I created the template to illustrate what is required to get the lot to work. Sort of a minimum requirement.
I compiled my set of libraries again and found no error. SD compiled as well.
The relative to work space paths help to get the stuff compiled. I used that option as I refer to the Core and Library object in the work space. As i recall I might have had some problems referring to outside objects.
One thing that I did, was to move the Arduino installation to the root of the drive. (c:\Arduino-022..)
I use that exact work space for all my projects without any problems. I am sure that there is a small setup issue with your project. You should look at all the settings in the tool chain setup. Especially the includes and library directories. There are also some compiler switches and more. I don't remember all.