When you run CSSMenuWriter in Dreamweaver, it should place the CSSmenuWriter' and 'Scripts' folders in the root of your Dreamweaver site. Is it not doing this? If it isn't, maybe there's a problem with the way your site is defined in Dreamweaver's site definition. Might be worth checking 'Manage Sites' > Your Site and checking the structure of the local site for a clue as to where these folders are being placed.
Regarding the error message, - this seems to be a common occurence, and is a DreamWeaver fault, rather than a WebAssist Extension fault. The way that people seem to be solving this is by deleting the DreamWeaver 'MacFileCache' file
Instructions for doing that are Here