Note that inetd needs to locate cygwin1.dll in order to start. Also note that services start even before you login. So how is inetd (usually in /usr/sbin) to find cygwin1.dll (usually in /bin)? The answer is that the Windows loader will look for dll's first in the directory that the program loaded from (/usr/sbin) failing that it will look for it following PATH. So is <cygwin install directory>\bin in your PATH? Not in your Cygwin PATH but in your Windows PATH. Remember services are started even before you login so Cygwin's bin directory (usually C:\Cygwin\bin) must be in your Windows System environment variable PATH (Windows User environment variables such as PATH are only in affect when the user logs in).
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