I think I found the problem. In the linker panel of the Target Settings, the whole panel is squashed. I imagine this is because of my particular video monitor settings. Anyway, the last radio button (Absolute, Single-File Assembly Project) is truncated and squashed together with the next line (Application Filename). It looked as if they were the same item. (Looking similar to the first radio button entry, (Use Custom PRM file).
Anyway the Application Filename referred to a non-existant path.
I tried installing the whole works on another PC and got the same result. Changing to a correct path for the output now works fine.
Many of the Target Settings panels are messed up on my machine. Some of the right edge buttons on the OSEK Sysgen panel are not even visible...