So then I...
-Go back to the Options dialog & set the "Image Search Path" to the folder where my jpg is.
-When I do that a DOS shell message comes up that says "Error: Unknown argument: Files\Next"
This is what you should be doing - this allows to specify the path to look for missing textures (and other files like .ior) which are referenced by MXM files used in the project.
Now I am not perfectly sure what goes wrong with the DOS box - does this occurs when rendering (exporting) or does this occurs when working with the export options dialog? Can you be a bit more specific about that? BTW - that platform are you on?