This issue occurs in Vivado Design Suite 2012.2 on Windows OS or in projects which contain spaces in the path to the .wcfg file.
The directory to the wcfg file is not being properly escaped.
Back slash characters separating directory structure are being treated as escape characters, and spaces are treated as indicating the end of the file name.
The wcfg file still exists and can be opened after launching the simulator.
This issue has been corrected in Vivado Design Suite 2012.3.