Some ideas:
Is your map ATI? If not, where is that folder and what's in it?
Could VisualMunge be running from the wrong folder?
Check your access permissions.
Run VisualMunge as an admin.
Do you have an ATI graphics card, windows 7/vista, and havn't gotten frisbee's munge fix? I have windows 7, and before I got frisbee's munge fix vm just went /NVIDIA was unexpected at this time and didn't munge right.
Weird. I just swapped out my trusty old NVIDIA for a newer ATI card. (i'm on 7.)
Search has only turned up references to this Frisbee's fix, so a link would be nice.
Thanks.
Oh and running as admin gives the same error.
Also, pathetic laziness has stopped me from transferring over to my laptop to test the munge. Sounds like I don't have to.
More information -- this error occurs immediately after installing Catalyst 10/7 drives package on my system, on a fresh install, before the restart even.
If it matters, Card is an HD 5770 chipset...