Hi Jekyllo,
Which browser are you using? Which environment are you in?
My PowerApps version is 2.0.592, when I tried to create a Relationship from one Entity to another in Default environment with Edge, I am getting an error looks like below:

But when I switch to another environment, the Relationship can be created with no error.
With IE, I can create a Relationship from one Entity to another both in Default environment and newly created environment.
Are you getting the same issue with me?
Best regards,
Mabel Mao