I think that after I changed my datasets to have incremental refresh policies, we can no longer download any reports having "Power BI dataset" live connections to those datasets. It says: "Can't export to Power BI Desktop format. This dataset has some features in it that can't be downloaded to a .pbix file."
I understand that if I publish a dataset having one or more incremental refresh policies, then the dataset cannot be downloaded from the Power BI Service. But we just need to download the reports! I don't see why downloading the reports, with "Power BI dataset" live connections, would not work.