That fix did this:
/cygdrive/c/fff/trunk/scenario/effects:168 c:/devtools/mercurial/hg diff -r 232 -r 261 Decora-D3D/tools.properties
diff -r 40fd1d000dc1 -r 378157cfa4f0 Decora-D3D/tools.properties
--- a/Decora-D3D/tools.properties Tue Oct 21 20:35:34 2008 -0700
+++ b/Decora-D3D/tools.properties Wed Jan 07 20:06:23 2009 -0800
@@ -2,8 +2,8 @@
 # Make sure to use forward slashes for the path.

 # Also, it is recommended to use the Windows "short-form"

 # (i.e., no spaces), for example:

-#vcvars32.path=c:/Progra~1/Micros~1.0/VC/bin/vcvars32.bat

+vcvars32.path=c:/Progra~1/Micros~1.0/VC/bin/vcvars32.bat

 #dxsdk.path=c:/Progra~1/Micros~4

-vcvars32.path=c:/Progra~1/Micros~1.NET/vc7/bin/vcvars32.bat

+#vcvars32.path=c:/Progra~1/Micros~1.NET/vc7/bin/vcvars32.bat

 dxsdk.path=c:/dxsdk

 platform.home=c:/jdk1.6.0_10

---------------------------

that new path
   c:/Progra~1/Micros~1.0/VC/bin/vcvars32.bat

 doesn't work on my machine. The old path does work.
Note that the old path is used elsewhere in tools.properties in Decora-ME and Decora-SSE