Mmm...
Try to add the full path to PP:

[code=pascal]make OS_TARGET=nds CPU_TARGET=arm BINUTILSPREFIX=arm-eabi- PP=c:\your_directory\fpc4nds\bin\arm-nds\ppcarm.exe[/code]

The problem with devkit r27 is that some paths are different, so you should fix fpc.cfg too.
By the way, the fpc 2.4.0 release is next to be released (in a week or so) and it is compatible with r27. This time there will be a release for linux too