Hi Marcin and Curtis,
Thanks for your reply. Sorry I have been away from work, so could not respond earlier.
I tried both your suggestions, but still got the same error. Please see the attached JEPG.
I suspect the problem is: %Name% is not recognized as inline variable substitution, but just a series of characters. I tested by keeping %InputWorkspace% in the input window, but use an existing layer file name. The model ran no problem. But once I used %Name%.lyr to replace the existing layer file name, I got the same error.
I think the potential reason is: Inline variable substitution is designed for elements going along the flow of the model, instead of an element (symbology layer variable in this case) appearing half-way in the model and use inline variable substitution for input.
Am I on the right track?
Thanks heaps for your input.
Christina