I’m having the same problems. I like this plugin a lot, because it helped me translating lots of plugins to german.
As can be seen in the error-message, the path to the themes-directory is somehow doubled.
At least for me this error only occurs within the themes part (not within the plugin- or wordpress-part)
Hopefully there will be a solution.
I managed to avoid those warnings (in the admin-section) by replacing
$dn = dirname(str_replace("\\","/",WP_CONTENT_DIR).str_replace('wp-content', '', $values['Template Files'][0]));
with
$dn = dirname($values['Template Files'][0]);
and
$main = file_get_contents(WP_CONTENT_DIR.str_replace('wp-content', '', $themefile));
with
$main = file_get_contents($themefile);
But this didn’t help to get the theme-translations back. As you can see on https://www.vergleiche-deine-versicherung.de
(there is still some english/german confusion)
Best regards.
By the way: I don’t think this plugin generates wrong .mo files. I didn’t touch thoses files and the plugin stopped working after upgrading to wp 2.9