@Greenslade
It sounds like you have it all setup correctly. If you have a light on one drive and off on another I wonder if it's getting enough power? A USB2 port is good enough for a USB floppy drive but I'm wondering if an older floppy drive needs more power?
Have you tried to run the GW command in a standard CMD line? PowerShell may be too powerful, though it shouldn't matter. By the sounds of it the shell cannot find the path. Are you dragging the exe into the shell window? What if you just run it from the explorer icon?
Funny that Windows software doesn't open any windows and needs DOS. Thought we had moved on from this. Might as well stick with the retro PC if you wanted DOS!