All custom geographic transformation files are saved with a .gtf extension and stored in the Documents and Settings folder: ...\Documents and Settings\<user>\Application Data\ESRI\<product>\ArcToolbox\CustomTransformations. If the Application Data folder is read-only or hidden, the output is stored in the system temp folder. The tool will fail if it encounters a write-protected folder.
Make sure the output location is not write protected. Change permission through operating system commands.