The path to the target is c:\lyxfiles\thesis\ch3.lyx
The full error message is
--------------
Error: Cannot open file:
C:/lyx/tmp/lyx_tmpdir3780a04072/lyx_tmpbuf0/c:/lyxfiles/thesis/ch3.tex Invalid arguement
--------------
This looks to me like a simple case of LyX not recognizing that a path which starts with a drive letter specification ("c:/") is an absolute path and not a relative one.
Could you try without the drive letter, that is setting the target to "/lyxfiles/thesis/ch3.tex"?
(And is "argument" actually misspelled in the error message? I really must download the source so I can start submitting patches. This is just the sort of thing that the main developers never get around to because it's not a showstopper for anyone, but is trivial to fix, so it's ideal for a community-contributed patch.)
-- Michael Wojcik
