Did you exit the Workflow builder/designer and go back into it? It doesn't seem to register changes as they're made. Can you post a screenshot?

Yeah, I completely left the designer and came back in. I even created a new sub site with a new workflow and I had the same problem. I have a friend that is able to reproduce the same issue with on-premise Nintex install while the Office365 version allows selecting an existing list. I tried exporting the workflow, modifying the entry for the task list, and importing again and I get the same error, that a list by that name already exists.

How did you create mentioned task list?is it native sharepoint task list?

if so, then nintex doesn't recognize such task lists, you have to create one via 'Create new...'

The task list was created as a native SharePoint task list which Nintex has chosen to not support for some reason. Yet if I have a SharePoint 2010 task list it works just fine.

I do not have experience with 2010. not sure what/where/why changed.

but that the way how it works in 2013.

did this make clear why do you experience this behaviour?

could the question be closed?