This was actually getting caused due to incorrect sort being used. I had the windows programs in my path and a 'which sort' clearly told me what was going wrong.
A change in path declaration fixed this issue
bash-3.2$ which sort
PATH=/home/lassauge/MyDocuments/Qemu/libusb-win32-device-bin-0.1.12.2/bin:$PATH CFLAGS="-O4 -march=i686" \
PATH=../libusb-win32-device-bin-0.1.12.2/bin:/usr/bin:$PATH CFLAGS="-O4 -march=i686" \
Anyway, I have not completed the build. Currently I am getting some usb library related errors. Will update this post once I completely compile this.
Completed this build. Though the above fix removed the error, it did not create the proper config-all-devices.mak. So, I had to manually create this by running the appropriate command
cat i386-softmmu/config-devices.mak | grep =y | sort -u > config-all-devices.mak
Again, I got the error that isa vga device was not created. So, again, I manually entered the vga-isa.so as a dependency for target "all" in the Makefile.hw.
Also, it did not pickup the usb library include folders correctly. To fix this, I added the following to config-host.mak
CFLAGS=-O2 -g -O4 -march=i686 -I../libusb-win32-device-bin-0.1.12.2/include
Another issue was the fmod libraries needed absolute path. I changed that also in the configure script. However, usb libraries worked fine with relative path from qemu folder. I think, fmod would have got linked from a sub-folder inside qemu where as the usb lib would have got used from the qemu folder itself. Anyway, I am running the qemu compiled my me :)