(for DB2 v9.5)
In a "db2cmd.exe" window on your Windows based DB2-server, use
db2 get dbm cfg | find /i "DIAGPATH"
If the value is blank, the the default location for DB2 V9.5 on Windows depends on the windows version.
Windows XP , Windows 2003 Server:
C:\Documents and Settings\All Users\Application Data\IBM\DB2\DB2COPY1\DB2
Windows Vista , Windows 2008 Server and higher
If the value is not blank, then the directory path needs to exist, and the account that runs the db2instance has to have full rights to this path. Verify this manually (use "runas" and test out writing the file).
If this is a production server, be sure to have a working db2diag setup, otherwise it is an unsupportable environment. The two symptoms might be connected...
Solve the db2diag.log issue first.