ISE *claims*
Your setup is not 'setup' correctly, the shell program is expecting to find an external 'exe' in a specific location, but it is not where it should be.
I was on xilinx website earlier today, and happened to glance at an 'errata' that stated some versions of Xilinx accidentally shipped WITHOUT the correct 'exe' files for simulation.
it specifically related to older versions running on 64 bit windows, seems they only populated the 32 bit directories on some versions of the ISE. ( are you running on 64 bit windows?)
Sorry I don't have more info. my error was different so It was only a casual glance.
Also be aware that whilst you can install older ISE on newer Windows systems, but many times the 'wheels' randomly come off.( random crashes ,missing files,incorrect compile results, bad programming files)
check this out:
http://forums.xilinx.com/xlnx/board/crawl_message?board.id=INSTALLBD&message.id=3886
& this:
http://www.xilinx.com/support/answers/18419.html
The plan is clear, old versions of ISE on old versions of the windows OS.
*** This******
Google is your friend "ise 9.1 xilinx vsim"
http://forums.xilinx.com/t5/Installation-and-Licensing/Xilinx-9-1I-Ise-Simulator-Problem/td-p/149288
The only other thing I can think about is when I was working on a virtex II design under 9.1,
I think the simulation tools had to be downloaded separately due to the mentor graphics licensing issues, it was like 6 years ago so my memory is flakey…