Hi Graeme,
As I was originally responsible for writing the line of code that gives the error you are having trouble with ("The ghostscript path points to a non-existent file"), I will try and shed some light on it.
During the tests of ghostscript on the server, whatever you have typed into the 'ghostscript path' settings box is passed into the standard PHP function 'file_exists' ( http://uk1.php.net/file_exists ).
The only way to get the error above error message, is if 'file_exists' returns false.
As far as PHP is concerned, whatever you have typed in to that box, is not a file that exists on the server the PHP code is running on. It may be that the file in question does exist, but the permissions prevent PHP from accessing it, or the file path may simply not be there on the server.
Please also double-check you have given a file path not a web URL (e.g. '/usr/bin/gs' or 'c:\gs\gswin32c.exe' NOT 'http://www.example.com/usr/bin/gs') and that the full path has been given, including the name of the executable file, not just the path to the directory that contains the executable file.