Do you have directory (folder in Windows parlance) called mroot?

You might have missed the step a bit further up in the instructions.
In addition to making the source and master partitions (from now on I'll just call them source and master directories because I just made two directories on one partition: /mnt/hda1/source and /mnt/hda1/master.) you will also want to make two folders on the root of this partition: boot and mroot. This will leave you with a partition having four folders: master, source, boot, and mroot.