ediff merge fails on Win2K

[Eric Pement]

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In GNU Emacs 21.2.1 (i386-msvc-nt5.0.2195)
 of 2002-03-19 on buffy
configured using `configure --with-msvc (12.00)'
Important settings:
  value of $LC_ALL: nil
  value of $LC_COLLATE: nil
  value of $LC_CTYPE: nil
  value of $LC_MESSAGES: nil
  value of $LC_MONETARY: nil
  value of $LC_NUMERIC: nil
  value of $LC_TIME: nil
  value of $LANG: ENU
  locale-coding-system: iso-latin-1
  default-enable-multibyte-characters: nil

Please describe exactly what actions triggered the bug
and the precise symptoms of the bug:

  1) From the menubar, select "Tools | Merge | Files"

  2) Select file1.txt (6 short lines), file2.txt (likewise)

  3) The Emacs editing window splits into 3 windows, with
  file1 on the left, file2 on the right, and a merge file
  on the bottom. The highlighted differences are shown,
  and a new Ediff window opens, and becomes the currently
  active window. Everything looks as expected.
   
  4) Press 'n' to go to the next difference region. Immediately
  causes an error (wrapped for legibility):

  Could not run c:\bin\diff3.exe                       \
  c:/DOCUME~1/epement/LOCALS~1/Temp/fineDiffA1540VcN   \
  c:/DOCUME~1/epement/LOCALS~1/Temp/fineDiffB1540imT   \
  c:/DOCUME~1/epement/LOCALS~1/Temp/fineDiffB1540imT

  However, 'diff3.exe' is GNU diff v2.8 and is on the PATH.
  When I use ediff to Compare two files, I do not get this
  error. My OS platform is Windows 2000 Pro.

Recent input:
<help-echo> <menu-bar> <tools> <ediff-merge> <ediff-merge-files> 
n <menu-bar> <help-menu> <report-emacs-bug>

Recent messages:
Reading file c:/Program Files/metapad/file2.txt ... 
Mark set
Computing differences between file1.txt and file2.txt ...

B [3 times]
Processing difference regions ... done
Merging buffers A & B into C ... Done
Refining difference region 1 ...
ediff-prepare-error-list: Errors in diff output. Diff output is in #<buffer 
*ediff-fine-diff*>
Loading emacsbug...done