You should read carefully what the warning window says.
Every state of your menu button must be a group that contains text and button object. On the same layer. You can not make a button form just a text.
Now, as you have a group of text and graphics that represents your button on the mouseoff layer, you create a similar group on the mouseover layer. Then you soft group these two groups. Now you can make a navbar of it.
See attached file. It's your web design. I just grouped objects correctly so now you can create a navbar without a problem.
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