I don't know what it is with DMC, but it's unable to find masm386 in my path. Take a look:

D:\DMD\dmd2\src\druntime>dmc -c src\rt\minit.asm
masm386 -DM_I386=1 -D_WIN32 -Mx src\rt\minit.asm;

Can't run 'masm386', check PATH

But if I run it manually:
D:\DMD\dmd2\src\druntime>masm386 -DM_I386=1 -D_WIN32 -Mx src\rt\minit.asm

Then it works. So what's wrong with DMC? I've put masm386.exe in the bin folder of DMC, it's in the PATH..

Sorry, it's not an issue with DMC. It's an issue with Walter's make from the looks of it. I'm still trying to figure out why it can't find masm though..