It looks like HLA isn't properly installed. Or rather, MASM isn't properly installed since it looks like you're using the version of HLA that uses MASM as a back-end. I've found MASM/HLA and RadAsm to be a pain in the ass. Have you tried HIDE? The installation is as easy as unzipping the archive and it's completely self-contained:
http://home.comcast.net/~kyzra/hlafiles/HIDE12.zip
As for what you're doing wrong now, do you have nmake installed?