On windows in command prompt, running latest version of web2py

When on any directory other than web2py\applications\<appname>\databases, 
this works fine:
db = gluon.DAL('sqlite://storage.sqlite')  and creates a new database or 
connects to an existing database. 

When I go db = 
gluon.DAL('sqlite://storage.sqlite',folder='c:\web2py\applications\<appname>\databases")
  
it is finding the SQLite database, but throwing: 
OperationalError: unable to open database file which is suggesting to me it 
does not have permission to read the file. I am an administrator on the pc 
and can connect to the DB fine in web2py or SQLite browser. 

Any suggestions?


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