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As a workaround, i ended up using the views rules module at drupal.org/project/views_rules which "Provides Views directly as Rules actions and loops to seamlessly use view result data."
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First, you should be using the current -dev version of Rules - that will make it much easier to do what you want.
Second, for the "Node is of type" condition, switch to the data selector for the first entry then select "node" from the data selector. This is the data object "node" that was created. For the content type, enter the machine id of the content ...
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