I did not have to mess with any settings outside of the wizard to get it set up, compiled and executed.
And your project, apparently with debug info, works here just fine as well...
What is the path where you have your projects saved? At least under Windows Vista and 7, you can get an at least similar error when working in the "program files" folder, as there usually is no write access to those folders...
Also, for completeness sake, what is the exact version of Pelle's C you're using?
Ralf