I don't think it wants to delete Documents and settings folder, i don't think it can be deleted at all.
/remove c:\Documents and Settings\file_to_be_deleted.txt
* /remove: no such file 'c:\Documents' It generates that error, no matter if you try to delete a folder or a file in this folder. So i think it's just a badly coded script that keeps something in DaS folder, and doesnt use $shortfn or quotes in remove command.
Edit:
Actually you can't even remove directories using /remove, but /rmdir
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