I'm not sure. Based on the error message, the most likely explanation would be that the path it is pointing to does not contain a srcsafe.ini. To verify, you might add a Run Script step before the SourceSafe step with code like this:
Code:
If vbld_FSO.FileExists("<path from Database field of SourceSafe action>\srcsafe.ini") Then
Builder.LogMessage "srcsafe.ini found"
Else
Builder.LogMessage "srcsafe.ini not found"
End If