I went into a chat session with support and spent about 30 minutes on this issue and was able to get around this error.  There must have been an update that caused this problem but it seems this is the only way to enter a bill with an open PO. 

First you have to open a vendor with a open PO you are applying against. Then when the add to bill window opens select the bill that references the bill.  Above the vendors name you will see in blue "1 linked bill" click it.  Next you will click purchase order and then click yes to cancel.  When the purchase order opens up go to the upper right and click copy to bill.  At that point you should be good to go.

What ever happened they need to fix this.  Adding extra operations to a simple task has to be a mistake.