If you want to use the New VI Object VI to insert a custom control you need to feed it a valid path and set the Class input to GObject or a class it inherits from. I would be interested to know if there is a way around this but I think you will also need to save the .ctl (at least temporarily) so you have a valid path to reference.
To explain the error you were getting, you were telling LabVIEW to put whatever was at the path "Control 1" into your new VI. That isn't a valid path so LabVIEW just gave an error saying that it couldn't create that object.
jacobson's post in Create type def and then use it was marked as the answer