Hi Mike
I think you have to specify log directory as well

EXEC dbo.sp_DatabaseRestore
@Database = 'TEST1',
@BackupPathFull = '\\PATHTOFILE\FULL\',
@BackupPathDiff = '\\PATHTOFILE\DIFF\',
@BackupPathLog = '\\PATHTOFILE\LOG\',
@RestoreDiff = 1,
@ContinueLogs = 0,
@RunRecovery = 1;