WinSCP cannot start session if the first local disk in windows is not browseable. My boot disk is called H:, mys system disk is I: and the first disk is D:, which is cdrom. In this cicumstances winSCP tries to read D: which is impossible and exists with an error.
The solution is to ask user which local disk should be set for left panel and/or possiblity of setting it in preferences.
Does it help setting "local directory" on environment tab of login dialog?