How to solve Reference Problem in SolidWorks "because of the current setting, the reference will be automatically broken"

Almost every problem in solidworks is fixed with a "hidden" setting :)

Make sure the box highlighted below is NOT checked
Not sure what it actually means, but you will not get the "because of settings...External...Broken" message.

Also, No need to reinstall...(like ever ?)
You can go to the delete software area of windows...
right click on Solidworks, and select Change.
Follow the prompts, and you can run a a repair utility
that will sniff for corrupt stuff.