I was running the command on "C:\Windows\system32" and it bwas trying to created a directory there.
That is what I thought. Don't do that, especially in Windows 7 or Server 2008 SR2 (or Vista for that matter) because that is a "protected" directory and you need additional permissions to change things there.
The best thing to do is create a directory elsewhere and work in there. With Windows 7, working in c:\users\xxx\Documents is acceptable - at least there are no spaces in the path.