I'm relatively new to the CDS, so I welcome any corrections to misunderstandings on my part.
The project entity I am refering to is the out of the box msdyn_project entity within Customer Engagement. The entity does have a few custom attributes added on to it.
I don't think it's an issue associated with restricted entities for several reasons:
1) My organization does have the Customer Engagement Plan.
2) In the link to the documentation provided, msdyn_project is not listed as a restricted entity.
3) I am able to connect successfully to msdyn_projecttask, which is listed as a restricted entity.
I am trying to create something similar in PowerApps to the out of the box time entry form from the Unified Interface for PSA. The project entity would just be a lookup to the time entry entity.
Also, I've confirmed that this behavior occurs both in my production environment and sandbox environment.