To keep the UDK Project clean and simple you might want to use custom directories to store Packages and Maps etc. (This also resolves the issue of “File Externally Referenced”)

To add a new Path you have to open the DefaultEngine.ini (%UDKPath%\UDKGame\Config)

In the [Core.System] Category you can add your own relative Path:

[Core.System]
+Extensions=mobile
+Paths=..\..\NealsStuff\Content

If you open UDK and the Contentbrowser nothing will have changed.

Create a new Package and save it to your custom path.

Now when you open up UDK, in the content browser you automatically see your new package (and have no “file externally Referenced” error)