Ok... with that setup in your Project Options, open the project (.ppj) file in notepad, copy and past the resulting LIB= path here...
If it's truncated by POIDE, yes that's likely a bug.
But if it's not... it may indicate other problems on your system.
What operating system are you using?
I'm using Win7 x64, 8gb memory with Pelles C, 6.50.8 rc4 x64 and just test-built a project with the project libraries bloated out to 40 folder paths, including junk folders, with the needed ones at the end, and it worked.
It might be good if someone else could test this on an x86 system...