Hmmmm....I would say that its not finding it on your sd card for some reason.I downloaded flash_image twice, and still get the same results.
Just verifying here, it is extracted from zip right?
Umm..you are typing correctly.
Let me think about this some more, cuz I'm baffled. I read thru the Tacoroot method and it is similar to Capt's method.
Just 1 question, and I'm just wondering...you are doing this to be totally s-off?

Because if your phone is unlocked, s-on from the HTCdev method, you still can flash roms, kernels etc....