The beginning part of the error is this.
PropertyBags\Elements.xml', line 2, character 62: The 'AlwaysCreateFolder' attribute is not declared.
The wsp is getting created but going to the site collections solutions and saying activate causes the error.
I opened the wsp that is generated by the Save site as template action and this attibute is defined on line 2 and many many more times on different elements in the thousands of lines in Elements.xml. Why is this element attribute not being parsed properly?