I did google the error code and found a few nuggets but none of them worked. I checked to make sure I have write permission to the directory the compiler writes to and I do. In fact, the compiler has no problem writing all of the other files to that directory. I also tried this on my win7 laptop using a USB drive with the Arduino Software on it, and launching from there. Same error. Then....
MIRACULOUSLY- I copied the arduino program from the USB drive to the C-drive on my win7 laptop and it worked! So something on my desktop is keeping it from compiling properly. I guess I'm stuck with using my laptop for now with this thing. If anybody has an idea on why this worked and how my desktop can be cured would be great!
Check if this fixes the issue: http://arduino.cc/forum/index.php/topic,118440.0.html
I was in an Arduino workshop and I found the same problem in one of the computers.
Unable to rename 'core.a', permission denied
It was a windows machine, so I created another user with administrator privilege and installed Arduino by logging into the new account. This solved the problem.
Too bad you need to run as administrator, it is unsafe and a bad practice.