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This error occurs when you auto-fit a picture within a picture box that is set up as a Shared Content item and the attributes of the picture content itself are shared. This is the default behavior in QuarkXPress 7 where you cannot Stretch or Scale a picture to fit box when the picture content attributes are shared.
If you want to set up a picture box as a Shared Object, set it up to share only the box and its contents, but do not share the picture attributes. You can also create two separate boxes and import the picture twice into the layout and the render the layout.