AX2012 TFS online: "The path X is already mapped in workspace Y"

Trying to take advantage of Team Foundation Service online using AX2012 is often not straight forward. 

One problem pops up today related to "The path X already mapped in workspace Y" when trying to activate version control. The problem is related to cached workspace info.

Removing workspaces in VS2012 does not do the trick as the caching info that creates the problem resides somewhere else. Go to  C:\Users\<username>\AppData\Local\Microsoft\Team Foundation\3.0\Cache and look for the VersionControl.config. Clear the workspaces info there to solve the issue.