The location does not exist. If it did, you wouldn't be getting this error:
The system cannot find the path specified.
You need to figure out where SQL is trying to create the error log (the registry key Perry mentioned should be it) and create the path SQL is expecting.
Gail Shaw
Microsoft Certified Master: SQL Server, MVP, M.Sc (Comp Sci)
SQL In The Wild: Discussions on DB performance with occasional diversions into recoverability