The nsHosting set up service states "action required" to assign a domain to a web address. I have 2 domains, only 1 is shown in the drop down list.
If I choose "add domain not listed", and enter the domain I want to use, the error message is issued "domain already assigned to a hosting package".

What is the problem here and how can this be resolved?

If you are sure that the domain you want to assign is not already assigned to a different hosting package - you can probably resolve this with a quick call to NS tech support.