Lets use the following example
Create a TeamProject : BasicBranch ($\BasicBranch)
Create a folder, Main ($BasicBranch\Main)
add your solution to the Main folder
Create another folder, Common ($\BasicBranch\Common).
Convert Common to a branch.
Branch Main to Dev within a folder called Development (Branch $\BasicBranch\Main -> $\BasicBranch\Development\Dev)
At this point Main is a branch (the source of the preceding branch operation and Dev is a branch (the target of the preceding branch operation)
The branch Dev is contained in a folder, Development that is created during this branch operation (or it could already exist)
So in your question there is no duplication of Dev in the guide. There is a TeamProject (eBanking1), it contains a folder (Dev) which contains a branch (Dev). If it is easier for you to understand, simply change the names of Dev so they are not the same.
As for your problem, with the project reference, I have never had problems with project references being valid following a branching operation.
How did you add the project reference?
I assume the referenced project is in the same Team Project?
Is the referenced project part of the solution?
Changing the location of the Dev branch should not affect your problem with referenced projects
What problem are you encountering with the merge?
VS ALM Ranger