I've tried it with both build 16 and 17. I was calling it from the CD Shell console while experimenting with it.
I was able to get it to boot a drive letter, such as A: or C:, but when I passed any other file it gives me that error.
I can use chain on the same files and they work.
I tried it with build 11 and it works. It's as important to me now, was experimenting with passing commands to setupldr.bin and it doesn't seem to take any.