OK... seem to be a couple of problems here.

First, 'gcc' appears in both /bin and /usr/bin. (the directories are actually the same inode -- presumably junctions). However, if /bin precedes /usr/bin in the PATH, then I get the above error message. If /usr/bin, comes first, then it fails with a more understandable error:

/usr/lib/perl5/5.14/x86_64-cygwin-threads/CORE/reentr.h:109:26: fatal 
+error: crypt.h: No such file or directory
 #       include <crypt.h>
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This was fixed by installing libcrypt-devel. Then everything worked just fine... So problem solved!