>>What I see is the .PRG I have in my project (not the one used in the SET PROCEDURE) has no associated .FXP file. So I presumed that this one was not compiled. Therefore, VFP must have included in the EXE the .PRG/.FXP in the SET PROCEDURE.
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>>The reason I came across this issue is that without having the .PRG in my PROJECT, at run-time, I kept getting the error related to the .H file used in the .PRG. Note that the .PRG is the same, in both folders, and has not been change in 2 years. Yet, I was getting the errors at run time saying the variable "INC_NAME" (#defined in .H file) not found. Maybe I should look at this issue again when I am less tired.
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>It may not be able to find the .h file at compile time, depending on the path. I know there was trouble with that, but generally having a path set to cover all files in the project at build time seems to work, i.e. I haven't had this kind of trouble for years, perhaps since VFP7.
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>BTW, the .fxp files are used only when you run a prg from IDE (or execscript or explicitly compile from within the exe). The executable will contain its own version of the .fxp, which may never be on disk. Which is a bit different from vcx/scx which get compiled first (the objcode field contains the compiled code), on disk, and then included in the exe.

I think this is the key that I misunderstood; I thought that at Build time, VFP compiles .prg into .fxp on the drive and then includes it into the .EXE. And yes, somehow at compile time (even though I set the path to the folder where .h file resides) I was getting the error. Somehow I eliminated the error by copying the same file into the project folder and included it in the project. I will "play" with this again today.
Thank you.