>
 > So, it seems to me that LyX tried to execute 'BUGS.tex' 
instead of
 > 'latex BUGS.tex' or whatever it was supposed to do. Any 
ideas?


Seems like LyX doesn't know where the latex executable is or 
else this has never been set. If you look at 
Preferences->Converters->Converters and click on Latex->DVI, 
it should show you the program it's using in the "Converter" 
field. Make sure that it says something like "latex $$i"...

Hope this helps..
nirmal

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