Multisite are not creating folders for the subsites

You can find the various recommended .htaccess configurations on the Codex’s .htaccess page. Here’s the one for subdirectory Multisite later than WordPress 3.5:

RewriteEngine On
RewriteBase /
RewriteRule ^index\.php$ - [L]

# add a trailing slash to /wp-admin
RewriteRule ^([_0-9a-zA-Z-]+/)?wp-admin$ $1wp-admin/ [R=301,L]

RewriteCond %{REQUEST_FILENAME} -f [OR]
RewriteCond %{REQUEST_FILENAME} -d
RewriteRule ^ - [L]
RewriteRule ^([_0-9a-zA-Z-]+/)?(wp-(content|admin|includes).*) $2 [L]
RewriteRule ^([_0-9a-zA-Z-]+/)?(.*\.php)$ $2 [L]
RewriteRule . index.php [L]

I note that in your .htaccess file, you’re trying to Rewrite things to a file location (A:/...) rather than to a URL. I think this is probably the error you’re running into.