Thanks Adrià and Mihaela!
I suppose I did the sequence the wrong way around. I created the new format mapping before I derived the model mapping and modified it.
I tried rebasing my format mapping but it never lets me change the model, only the version number.
I am still very confused. Let me see if I am getting the process sequence right:
1. Are you saying I should have clicked on Invoice model, the root config in bold, and created a new model mapping, like so?

BUT #1: how do I know that the InvoiceProject model that gets created this way will have all the datasource mappings that I want so I don't have to recreate them from scratch?
Previously, I had both Invoice model mapping and Project invoice model mapping that both had the InvoiceProject component, but the one in Invoice MM wasn't as comprehensively mapped as the one in Project invoice MM. This was why I previously chose to derive a model mapping from Project invoice MM (and suffixed it with V1) as you can see in the screenshot above.
Also, I noted that Invoice MM was based off the latest version of the root Invoice model, and Project invoice MM was based off an older version. Keep in mind that Invoice MM isn't the mapping that I want. Now, if I create a new model mapping from scratch as depicted in the screenshot, it will be based off the latest version of the root Invoice model, just like the Invoice MM, which isn't what I want. So this means I won't be starting off with the model mapping that I need. I will need to recreate so many datasource bindings.
Anyway, moving on:
2. So after I've created a new model mapping on the InvoiceProject definition, I should do my modifications here. Which is recreating multiple datasource bindings to get it on par with what is in Project invoice MM, and then a few more which is my own modification/extension.
3. Then I should click on the root Invoice model, and create a new format mapping, like so:

BUT #2: In that last data model definition dropdown, how do I know which InvoiceProject is getting picked up? There is an InvoiceProject mapping in Project invoice MM, Project invoice MM V1, and My own Model Mapping. There are three of them! (If I try to click Create Configuration with My own Model Mapping highlighted (instead of the root Invoice model), I don't get the option to create a format config.)
BUT #3: Again, doing it this way means there's a lot of stuff I need to recreate in my format mapping. The stock format mapping "Project invoice (Excel)" has these mapping roots already established:

There's a bunch of calculated fields under model, and there's Tables and TableStatic. All these are not in the model mapping, they are in the format mapping. That's why previously I chose to derive from Project invoice (Excel) (and suffixed it with V1) as you can see in the screenshot. Now, if I create a new format mapping from scratch, it won't have all of these and I will need to recreate them.
4. Is this how it's supposed to look in the end?

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I'm really sorry this is so long but I'm really confused and frustrated. Why does it seem impossible to just get the mapping/format that is closest to what I need and then work off them incrementally to get to what I want, instead of having to start from scratch and rebuild what's already been built?
And the thing is, I wouldn't even encounter this if I didn't need to modify the model mapping because of a particular error:
Path 'model/InvoiceBase/CompanyInfo/BankAccount/xxx' has no binding to any datasource in using model's mapping
That's why I needed to have my own model mapping because I needed to add a couple more datasource bindings.
I would really appreciate some guidance on this please!! Thank you so much in advance.