>What have I done wrong?

Rather than speculate on what you missed, let me give you a step-by-step which should work.

1) Put your exe in the directory where you're going to tell VFP to look for distribution files. Do not try to put any of the VFP dlls in there.
2) Run the Setup Wizard. Tell it to look in that directory.
3) Next page of Setup Wizard: make sure you check Visual FoxPro Runtime on the items to include. And any other of those items you need to run your app. But you need the VFP Runtime files at a bare minimum. (Why the designers of the setup wizard gave you the option of not checking this is beyond me.)
4) Continue through the Setup Wizard specifying where to put the setup files, which type(s) to create, etc. Give the default installation directory as \appdir\, which will go to the user's local hard drive. Set the PM Item for the exe to %s\appname.exe. (For the command line. Put any description you want.)
5) On each workstation, log in as Admin.
6) Run the Setup program (from the network, from floppies, or whatever). This is done mainly to get the runtime files installed and registered on the workstation and create the PM Item (which you will change).
7) When Setup is completed, edit the PM Item to replace the local hard drive reference in the command line with your network app's location.
8) Remove the directory \appdir\ which was created on the user's local hard drive.
9) (Optional) I now move the PM folder from Profiles\Administrator to Profiles\All Users on an NT workstation.
10) (Optional) I now copy the PM Item for the exe from All Users\Start Menu to All Users\Desktop.
11) Reboot. Log in as any user.

The workstation should now have a PM Item and Desktop Icon which will successfully launch your app when logged in as any user.

Cheers,
Rich.