The files are actually stored in archives (the .fpk files under the "Resources" directory) and civ5 uses the path you see to locate them in the archives. So it's normal that you don't see any file with that path on your hard drive. Now as to why something fails on your machine, I can't tell. I bet on a drivers' issue that makes the dds file decoding fail. It may be another mod incorrectly replacing some of the civ5 graphics with its own. Etcetera. Unfortunately, I can't know exactly why on your own computer it fails, just give you my guess: drivers.