FCP X 10.1.1 - Transitioning to libraries without blending
I got it to work. The key is to update Events and Projects to Libraries (which, incidentally, contain Events and Projects) in stages:


Hide everything except the Events and Projects that belong together in the same Library. Event Manager X is a great tool for this, as Jason suggested in the comments. Whatever tool you use, just make sure that only the Events and Projects that belong together are in the folders "Final Cut Events" and "Final Cut Projects".
Next, open Final Cut Pro X.
Go to File and click "Update Projects and Events..." near the bottom of the menu:
Click "Update All"


Final Cut Pro X will do its thing and you'll have a new library with just the Projects and Events you want inside of it.