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SQRT Domain Error (Toolset) Bug
A couple of people have been running into this problem in the toolset. It seems it is not yet fixed, so here is a way you can avoid it altogether:
This bug is caused by broken uv-maps. It happens when the uv-vertices of a face share the same coordinates, i.e. are degenerated into a point or a line:
This is a picture of the standard barrel placeable (plc_h07.mdl) in blender. As you can see, the underside of the barrel lid is not mapped correctly. A lot of the standard placeables have this problem.
If you try to use fancymapping (normal & specular mapping) on this it will explode in your face