Did you install Calibre using administrator privileges? If so, your normal user account might not have permission to access C:\CALIBRE LIBRARY and you'd have to manually set those permissions. I've never used Win7, but, assuming they didn't change it too much from XP, you'd find the relevant tab in the folder properties.
The reference to a drive G:\ is somewhat absurd, I agree- especially since you say that there is no such drive... This might be a mapped drive of some sort, or just an input error. Those happen, you know
EDIT: I just re-read your initial description of the error. "Cannot find path" doesn't sound very much like what I'm assuming, but it wouldn't hurt to check it out just in case.