There's been no. of posting on it ..so i best tried to go through most of them 
..and I thought to explain very basic of JCL AFIK.

Step1 : showing DISP=(NEW,PASS,DELETE) So basically the dataset is being 
created,passed to be processed in subsequent steps ...HOWEVER not being catalog 
so after processing MVS is suppose to delete it...

Step2 : DISP=OLD ...Just telling program to have EXCLUSIVE hold on the dataset 
while processing so again as per the step1 dataset is suppose to be deleted...

This is so simple as it is ...

Now coming to STEP3:- where it show jcl error is obvious as 

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