Bad results and error when making normals

The error reads:
“Circular reference in texture stack”

The normals bake out badly as well.

Just open the attached blend file and press the bake button and you will see what i am talking about
Crocodile Steve sculpt.blend (5.76 MB)

I was able to bake a clean normal map using these steps:

  1. Select the retopo
  2. Click on the texture
  3. Scroll down to Image
  4. Delete croc steve normal
  5. Click New, leave it as untitled
  6. Select the sculpt
  7. Shift-select the retopo
  8. Bake it
  9. In uv editor, ‘save image as’

Hmmm, well i am not sure what was wrong, but that did the trick
Thank you!