In ArcGIS Desktop 10.4x, running the Project tool with a workgroup geodatabase connected using the Add Database Server or Add Database Connection option returns the error, "ERROR 000208."
1. Under Database Server, use the Project tool. Provide the output as a standalone feature class after which the tool runs successfully, use the Feature Class To Feature Class tool to import the projected feature class in the destination feature dataset.
2. Upgrade the workgroup geodatabase to 10.4, execute the Project tool by specifying the input feature class and output feature class from\to the database connection under the 'Add Database Connection' option.