David,
I don't know where exactly you are using PROJECT_LOC, but this is what worked for me. In the RTSC tab, I clicked on Add... to add a repository and I just typed ${PROJECT_LOC} in the text box. This is the result:
Then, when I build the project that path is corectly expanded:
"C:\\ti\\ccsv5\\utils\\bin\\gmake" -k all
'Building file: ../app.cfg'
'Invoking: XDCtools'
"C:/ccsproducts/xdctools_3_25_03_72/xs" --xdcpath="C:/ccsproducts/bios_6_35_04_50/packages;C:/ti/ccsv5/ccs_base;C:/Users/a0868339/workspace_v5_5/customPlatformTest;" xdc.tools.configuro -o configPkg -t ti.targets.C64P -p tisb.my64board -r release -b
Is that what you tried to do?