Can't see anything wrong, both look nearly identical...

And one of these works and one doesn't?
I guess the only thing you could do now is try to debug madExcept.pas by setting breakpoints and trying to figure out why it doesn't work when compiled to Z:\. In order to set breakpoints you need to copy "madExcept.pas" and "mad.inc" into your project folder and then recompile. First breakpoint to set might be in madExcept.HandleException().
It's all very weird, to be honest.
Of course alternatively you could always compile using the UNC path. But it shouldn't be necessary. Not sure what's going on...