I found this build failure problem for Device Emulator BSP reported by a customer on some forum. Thanks to Dean Ramsier for posting the solution.
If you cloned Device Emulator BSP with WinCE6.0 to say MyBSP and getting error like "Can't find kitl.dll" then you are probably hitting into this issue. The cloning tool has a bug and is not renaming a file DeviceEmulator-preri.bat to MyBSP-preri.bat in MyBSP\files directory. Although this is an optional file but device emulator build depends on it.
The fix is simple just to rename DeviceEmulator-preri.bat in MyBSP\files directory to MyBSP-preri.bat.
Hopefully this will work.