On my USB flash drive, I have the directory structure set like so:
/ - PortableApps/ - FirefoxPortable/ - PidginPortable/ - FirefoxPortable.exe (not a shortcut) - PidginPortable.exe (also not a shortcut)
In the above sample, I can double-click on FirefoxPortable.exe (outside of the Firefox Portable directory) and it will run.
However, when I double-click on PidginPortable.exe (also outside of the Pidgin Portable directory), I get "Pidgin.exe was not found. Please check your configuration". If I run PidginPortable.exe from it's normal location (/PortableApps/PidginPortable/PidginPortable.exe), it works fine.
I have 7 portable apps set up as above, but Pidgin Portable is the only one of them that fails to run in this configuration.