Hope this helps someone who is confused and frustrated.
This what I did:
1. Save schematic .SchDoc
2. Save pcb .PcbDoc.
3. Save project .PrjPcb.
4. Remove pcb doc from project (right click on .PcbDoc -> remove from project).
5. Add new pcb doc to project (right click on .PrjPcb -> add new to project -> pcb).
6. Save new pcbdoc. Name does not matter.
7. Both of these work - from .SchDoc [design -> update pcb document] OR from .PcbDoc [design -> import changes].
8. Save this PcbDoc.
9. Remove this new PcbDoc from project.
10. Add the OLD pcbDoc to project (right click on PrjPcb -> add existing to project).
11. Repeat step 7.
12. Delete the new PcbDoc using explorer.
13. Get up from your chair and dance/rejoice in silence.
14. Get back to work.
I have no idea why this worked.
Let me know if this might be one of solutions and I will mark it as solved.