It doesn’t look like a bug, I think your are missing some packages in your DevStudio.
Since 16.10.3 (@CoRfr can you confirm this is the first version?) some developper tools like GDBserver, TCF… are not included in the default Framework image.
Those tools are in a new devMode app which is not included by default when you build the Legato Framework, so when you connect to your board with DevStudio, it detects that the devMode app is missing and let you know it.
Because without devMode app, you won’t be able to debug yours apps since there is no gdbserver on the target.
From the Devstudio notification, you can install it, but in your case you haven’t installed any SDK with a devMode app, so DevStudio cannot find the needed .update file to install.
In other words, you have a board with a 16.10.3 (without devMode by default) but no 16.10.3 in DevStudio.
Can you go to the “Packages” perspective and install the needed 16.10.3 SDK from SierraWireless updatesite?
If you already installed it, then it is a bug