Your getting that error message because you are on XP. Symbolic links only work on vista (didn't read your whole question just saw symbolic link not xp). What you need to do is download Junction (from microsoft website). This is a really good forum topic about it PowerShell script to create symbolically linked (mklink) copies of WoW. Give it a read though. Junction is just like symbolic link, but it doesn't come already on xp you have to download it. It is a simple little app. I can't help you too much on it (i used symbolic not junction) but that thread should be good.

Don't take this the wrong way. Try using the search function on Junction and then on Symbolic. There are not that many posts out there about it, so it shouldn't take you too long to learn how to use junction. I looked over the wiki on junction quick and it doesn't seem that good (again i said quick) so you might even have to google it.