Sometimes when I get that message at bottom right about the conversion to subd surface failing, I find that if I put the subd surface back to standard mode at level 0 (in the subd drop down menu choose standard mode) and then put it back into poly proxy mode (same menu), this helps the geometry 'catch up' with all the different instructions I have given it, particularly after splitting etc.

Read somewhere about subds needing to have changes made in poly proxy mode 'baked' to the surface and converting to standard and back seems to work for me. Might be worth a try.