Is your compass configuration correct?.
Unbelievable, compass chokes on directories with spaces (I think, and at least on a Windows machine).
I have resolved it by creating a junction from the repository into a folder without spaces - see this awesome utility: http://schinagl.priv.at/nt/hardlinkshellext/linkshellextension.html
And food for thought: consider if SASS is needed, do you want to debug your SASS or CSS?
If this post has saved you hair pulling post a comment and a follow @danielsokolows is always appricited.