LabVIEW's source control integration is intended to be used as a "window" to your source control project. It is not a replacement for the provider's client app, so not all functionality is present. The case you specified of getting the latest version of a VSS project is one example. There is not a way from LabVIEW to initially pull down all the files associated with a VSS project. This needs to be done from the VSS client. Once the files are on the local machine, you can then perform the basis source control operations (check in/out).
Regarding the menu issues. There have been reports of menus not updating correctly. This can happen if VIs are open before you configure source control. Once it is configured, any Vis that are open should have updated menus. In LabVIEW 7.1, the menus were statis and not dynamic as they are in 8.0. So in 7.1, if you selected to check out a file, the check out option would still be enabled. You could select it again, but you would get an error since the operation wasn't valid for the file's state. I can understand why the menus not updating properly would give you the impression that the mechanism is counter-intuitive, but once configured properly, the integration should work better than it did in 7.1. The main issue I have seen with VSS is when a project is configured and then it gets deleted or changed.
The project name ("$/newnew", IAAAAAAA") is how VSS labels their projects. This information is displayed as returned by VSS. I believe the second string corresponds to their database naming convention.
I think the correct process would be to call in and get a service request. I'd try to give as much information about your setup so the problem can be reproduced.
George M
National Instruments