You don't tell which options you pass to configure but it looks like you
only provide the Emacs directory to --with-emacs and not the full path
to and including the emacs.exe binary. If you still have problems after
adapting this, please send a full bug report (including config.log if
available) to bug-auctex, because this is somewhat off-topic in this
thread.
Well, I used the options suggested at section 2.7 of this document:
http://www.gnu.org/software/auctex/manual/auctex.pdf
Note that the manual on the web page still refers to 11.84, but there
were no changes for 11.85 in the section you are quoting, so this should
not be a problem.
Did you also include the quotation marks shown in the PDF file? Note
that those should be simple ASCII quotes, not typographic quotes which
you might get when copying from the PDF file.