I'll answer my own question....
The GPIF II hardware imposes some limitations on the state machines that can be implemented. Mainly, these
Full support is limited to state machines that are limited to two (or fewer) outgoing transitions from each state.Such state machines are called binary state machine in the rest of this document.
Each transition equation is limited to the use of four (or fewer) trigger variables.
Isn't it embarrassing how you can find the answer to your own question, by reading the documentation, as soon as you've posted a question !!
Not so embarrassing. I'm new to this product and ran into the same issue. The very informative error message from GPIF II Designer was:
Unable to synthesis the state machine.Please try changing outgoing transition equations from state 'PUSH_DATA_SCK0'.
Note it just says "try changing" - not "too many."
I also managed to find the information after digging into several documents. It would be nice if the tool itself were better at describing the real underlying issue.