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My reaction was the same as yours until I thought about it a bit more. Here's my quick take on it:

"Complete" is an operation performed on an action (i.e. complete the item). It is the equivalent of clicking an action's checkbox, as "Set Flag" is the equivalent of clicking on an action's flag button. You can apply these operations to Projects as well, and they will act on all actions in that Project. Just because all of the actions in a Project are marked as "Complete", however, does not necessarily mean the Project is "Completed".

"Completed" is one of the four states a Project can be in (Active, On Hold, Completed, or Dropped). The "Completed" state cannot be applied to an action, and putting a Project in the "Completed" state only marks the Project as "Complete" (i.e. marks its checkbox) but not the contained actions.

I agree that the wording here can be confusing. Maybe the project state should be called "Done" instead of "Completed", or maybe the operation should be "Set Complete" to match the "Set Flag" operation?

Do you have any better suggestions?