That doesn’t make sense to me because, unless you were using a very old version of macOS to create the .dmg, a disk image should only be considered legacy if it was created more than 10 years ago. Such images need to be converted (to the same format, if you want) in order to update their internal structure. I can look into this more if you want to send in the original disk image file and screenshots showing what you did with it that caused the error.
However, if your goal is to update the layout, it’s probably better to just copy the files in the old disk image to a folder and create a new disk image from it with the new layout. Converting doesn’t change an existing layout, anyway—it only affects the compression/encryption/license of the disk image wrapper.