Ediff not executing, displays error

Hello,

I am running emacs-24.3 bin i836 build of emacs on a Windows 7 32bit 
system and well I have trouble with running "ediff" from within emacs. 
Basically everytime I try to invoke ediff through M-x ediff or even 
through the file menus, I get asked to specify File A and File B after 
which I keep getting an error stating "Searching for program: permission 
denied, diff". I did find a previous thread, on the topic but 
unfortunately it seems to be unresolved.

I have verified my PATH and HOME environment variables which both point 
to "C:\bin\" where my emacs-24.3 folder exists.

Any suggestions on how to overcome this.

Aso, what does "Searching for program: permission denied" mean?