Hi Paul,
On Linux I’d be asking if the file existed or was a sym link. I recently had problems when the file was a sym link, it couldn’t be read. Then I remembered/noticed that you are on Windows. 
This is what I have been using to program my Duemilanove (aka 2009) with my usbTiny:
[env:2009_programmer]
platform = atmelavr
board = diecimilaatmega328
framework = arduino
;uploader = usbtinyisp
upload_protocol = usbtiny
No command line necessary, and it worked fine. Prior to version 4.0.1, the commented out uploader line was necessary.
Do you get any further if you comment out the upload_flags and upload_command and change upload_protocol to stk500v2 instead?
I’ve noticed under v5.x.x that the docs changed to add in the new stuff, but I’ve been working with bootloaders for ages and haven’t used the programmer with the new parameters yet.
(I’m not near my laptop ATM, I’m visiting my mother in law in a care home!)
Cheers,
Norm.