Enabling "Include app-local prerequisites" does not work - Causes errors or warnings

Enabling the "Include app-local prerequisites" causes errors or warnings to appear when packaging.

4.17 error:

Packaging (Windows (64-bit)): Program.Main: ERROR: AutomationTool terminated with exception: AutomationTool.AutomationException: Unable to deploy AppLocalDirectory dependencies. No such path: D:\Epic Games\UE_4.17\Engine\Binaries\ThirdParty\AppLocalDependencies\Win64

4.18 and 4.19 binary warning:

WARNING: Unable to deploy AppLocalDirectory dependencies. No such path: D:\Epic Games\UE_4.18\Engine\Binaries\ThirdParty\AppLocalDependencies\Win64

4.18 and 4.19 source error:

Error: System.ArgumentException: Staged filesystem reference cannot reference outside the staging root ({0})

Regression?: No
This occurred in 4.17

1. Create a new blank blueprint project
2. In Project Settings, enable "Include app-local prerequisites"
3. Package the project for Windows
   Result: In 4.17 binary and 4.18 and 4.19 source, the packaging attempt fails. In 4.18 and 4.19 binary, the packaging attempt succeeds but with warnings.
   Expected: Packaging succeeds without any warnings.