Have you downloaded all of the updated MW files from the FTP server?
NX > Product Updates > Moldwizard > Nx10
Based on your cue/status line it looks like you already defined the position for the gate and NX is cloning parts from the Gate Library to your MW project. The error indicates that the 'output directory is invalid or does not exist'. Therefore, do you have write access to the location of the moldwizard project/parts in your NX session?