It must depend on your operating system it works fine with me how it originally is, but i use windows 2000 so it maybe different for you if you have another operating system.
btw your not meant to type in these < > symbols i will post a working example:
cd ..\..\
winmugen -p1 "kfm" -p1.color 10 -p2 "wolverine/wolverineX.def" -p2.color 2 -s showdown
The "" are useful for folders that have different names to the .def file of the character.