Vincent, you were exactly right. Make was running from my Delphi 7 directory instead of C:\pp\bin\win32. Once I got that straight, things worked better however I'm still having problems (see below). What am I missing? Thanks!
c:/pp/bin/win32/make -C lcl all
make[1]: Entering directory `C:/lazarus/lcl'
c:/pp/bin/win32/rm.exe -f units/i386/win32/alllclunits.ppw
c:/pp/bin/win32/ppc386.exe -gl -Fu. -Funonwin32 -Fiinclude -FUunits/i386/win32 -di386 alllclunits.pp
Hint: End of reading config file c:\pp\bin\win32\fpc.cfg
Free Pascal Compiler version 1.0.11 [2003/12/30] for i386
Copyright (c) 1993-2003 by Florian Klaempfl
Target OS: Win32 for i386
Compiling alllclunits.pp
171 Lines compiled, 0.6 sec
c:/pp/bin/win32/make -C interfaces all
make[2]: Entering directory `C:/lazarus/lcl/interfaces'
c:/pp/bin/win32/make -C win32 all
make[3]: Entering directory `C:/lazarus/lcl/interfaces/win32'
c:/pp/bin/win32/rm.exe -f ../../units/i386/win32/win32/interfaces.ppw \
../../units/i386/win32/win32/interfaces.ow
c:/pp/bin/win32/ppc386.exe -gl -Fu../../units/i386/win32 -Fu. -Fuc:/pp/units/win32/rtl -Fuc:/pp/units/win32/paszlib -Fuc:/pp/units/win32/fcl -Fuc:/pp/units/win32/mysql -Fuc:/pp/units/win32/ibase -FU../../units/i386/win32/win32 -di386 interfaces.pp
Hint: End of reading config file c:\pp\bin\win32\fpc.cfg
Free Pascal Compiler version 1.0.11 [2003/12/30] for i386
Copyright (c) 1993-2003 by Florian Klaempfl
Target OS: Win32 for i386
Compiling interfaces.pp
45 Lines compiled, 0.5 sec
make[3]: Leaving directory `C:/lazarus/lcl/interfaces/win32'
make[2]: Leaving directory `C:/lazarus/lcl/interfaces'
make[1]: Leaving directory `C:/lazarus/lcl'
c:/pp/bin/win32/make -C components all
make[1]: Entering directory `C:/lazarus/components'
c:/pp/bin/win32/make -C synedit all
make[2]: Entering directory `C:/lazarus/components/synedit'
c:/pp/bin/win32/rm.exe -f ../units/i386/win32/allsyneditunits.ppw
c:/pp/bin/win32/ppc386.exe -gl -Fu../../lcl/units/i386/win32 -Fu. -Fuc:/pp/units/win32/rtl -Fuc:/pp/units/win32/paszlib -Fuc:/pp/units/win32/fcl -Fuc:/pp/units/win32/regexpr -Fuc:/pp/units/win32/mysql -Fuc:/pp/units/win32/ibase -FU../units/i386/win32 -di386 allsyneditunits.pp
Hint: End of reading config file c:\pp\bin\win32\fpc.cfg
Free Pascal Compiler version 1.0.11 [2003/12/30] for i386
Copyright (c) 1993-2003 by Florian Klaempfl
Target OS: Win32 for i386
Compiling allsyneditunits.pp
91 Lines compiled, 0.5 sec
make[2]: Leaving directory `C:/lazarus/components/synedit'
c:/pp/bin/win32/make -C codetools all
make[2]: Entering directory `C:/lazarus/components/codetools'
c:/pp/bin/win32/rm.exe -f ../units/i386/win32/allcodetoolunits.ppw
c:/pp/bin/win32/ppc386.exe -gl -Fu. -Fuc:/pp/units/win32/rtl -Fuc:/pp/units/win32/paszlib -Fuc:/pp/units/win32/fcl -Fuc:/pp/units/win32/mysql -Fuc:/pp/units/win32/ibase -FU../units/i386/win32 -di386 allcodetoolunits.pp
Hint: End of reading config file c:\pp\bin\win32\fpc.cfg
Free Pascal Compiler version 1.0.11 [2003/12/30] for i386
Copyright (c) 1993-2003 by Florian Klaempfl
Target OS: Win32 for i386
Compiling allcodetoolunits.pp
76 Lines compiled, 0.3 sec
make[2]: Leaving directory `C:/lazarus/components/codetools'
make[1]: Leaving directory `C:/lazarus/components'
c:/pp/bin/win32/make -C ideintf all
make[1]: Entering directory `C:/lazarus/ideintf'
c:/pp/bin/win32/rm.exe -f units/allideintf.ppw
c:/pp/bin/win32/ppc386.exe -gl -Fu../lcl/units/i386/win32 -Fu../components/units/i386/win32 -Fu. -Fuc:/pp/units/win32/rtl -Fuc:/pp/units/win32/paszlib -Fuc:/pp/units/win32/fcl -Fuc:/pp/units/win32/mysql -Fuc:/pp/units/win32/ibase -FUunits -di386 allideintf.pas
Hint: End of reading config file c:\pp\bin\win32\fpc.cfg
Free Pascal Compiler version 1.0.11 [2003/12/30] for i386
Copyright (c) 1993-2003 by Florian Klaempfl
Target OS: Win32 for i386
Compiling allideintf.pas
29 Lines compiled, 0.5 sec
make[1]: Leaving directory `C:/lazarus/ideintf'
c:/pp/bin/win32/make -C designer all
make[1]: Entering directory `C:/lazarus/designer'
make[1]: Leaving directory `C:/lazarus/designer'
Makefile:17: *** You need the GNU utils package to use this Makefile. Stop.
c:\pp\bin\win32\make: *** [designer] Error 2