Same thing on my XP machine and Galaxy S. What I did was edit the batch files and changed "adb" to "C:\AC_SWM\adb.exe". Everything worked fine after that.
This ^^ (be sure to change the loader.bat, reloader.bat, and usbdiag.bat files) Some XP machines can use the .NET code as is to get the path, others have to be hardcoded. At this point, I'm just hardcoding everything I have a fellow on XP with no service packs installed that has to install everything in the %winsystem% directory to get it to work. And they call Android fragmented lol.
One request -- does the path diagnostics tool work for you on your system? It should, everything it references is in the windows root directory. I'm just checking because it looks like I found someone who can test for me (hint hint lol)
The change is already made here, just looking at some other things and will update the beta. ETA is tomorrow, one fellow testing for me is in Poland, and they have that crazy daytime/nighttime swap thing going on