Indeed that should work, but it is also possible to prevent this without updating the sources.
I provided few workarounds for this issue here: Build yocto/legato 16.04
Folders/files that are not being found errors are caused by the switch to repo, so the legato-af.git repository is not standalone anymore and requires multiple other repositories to work, which is not something that is really supported in these versions of the Yocto distribution.