Error setting up SQL Replication

[Fredd]

I am getting the following error when trying to set up merge replication on
sql 2005 and yes all users on the box are administrators and we have set up
the folder that everyone has access to it read and write

this is the error message i get:

Msg 15121, Level 16, State 21, Procedure xp_cmdshell, Line 1
An error occurred during the execution of xp_cmdshell. A call to
'CreateProcess' failed with error code: '2'.
Msg 14430, Level 16, State 1, Procedure sp_adddistributiondb, Line 223
Destination path C:\Replication is not valid. Unable to list directory
contents. Specify a valid destination path

[Charles Wang [MSFT]]

Hi Fredd,
Welcome to Microsoft TechNet Managed Newsgroup.

The error messages you encountered were permission related. To let me
better understand your scenario and perform further diagnosis, please help
answer the following questions:
1. Was your distribution database created on a local SQL Server or a remote
SQL Server when you setup up your merge replication?
2. Were you in a domain environment or Workgroup environment?
3. Did your SQL Server service account has encough permission to read/write
the folder C:\Replication?
You can go to Services panel, double click your SQL Server service, switch
to the Log On tab to check your current SQL Server service account. If you
are using a remote distributor, please ensure that your distributor SQL
Server service account is a domain user account and has Read/Write
permissions on that folder. If you have Windows Firewall enabled on your
distributor, please first disable it for isolation.

Also please help collect the following information:
1. SQL Server Error Logs on your publisher and distributor
By default it is in the folder %ProgramFiles%\Microsoft SQL
Server\MSSQL(.n)\MSSQL\LOG.

2. Windows Event Logs on your publisher and distributor
Please gather Windows Event Logs on the problematic node: Start ->
Administrative Tools -> Event Viewer -> Export application/system event
logs and send them to me.

My email is changliw_at_microsoft_dot_com. If the total size of the files
is over 2MB, please first send me an email response and then I will send an
email to you to let you know how to upload large files to me.

Thank you!

Best regards,
Charles Wang
Microsoft Online Community Support
=========================================================
Delighting our customers is our #1 priority. We welcome your
comments and suggestions about how we can improve the
support we provide to you. Please feel free to let my manager
know what you think of the level of service provided. You can
send feedback directly to my manager at: msd...@microsoft.com.
=========================================================
This posting is provided "AS IS" with no warranties, and confers no rights.
=========================================================

[Charles Wang [MSFT]]

Hello Fredd,
Good morning!

Regarding this issue, I have not been able to get your response yet. May
you let me know what everything is going on? If you need further
assistance, feel free to let me know.