Use "Save as" to put the project file on another disk, then try again. It could be a corrupt preference, a temporary glitch, but I've often seen this alert precipitate a project file being lost. Now is the time to backup your materials. Don't quit Final Cut Pro until you're absolutely certain that your project files are safe. Perform a manual backup to a disk that isn't mounted when you edit (I recommend USB flash drives), and also copy everything in your project file to a new project file. Then open the copies you've made and see if they behave normally.
"Unknown Volume" happens when a drive fries, or sometimes if you change the name of a project file while it's still open and active. But you should guard against the scenarios outlined above.
If the above safeguards don't get rid of the error message, but your project file is intact, then use Render Manager to dump the render files, then check your System Settings, set the render files to go to a healthy drive, then try again.