Sorry if this has been covered - I'm finding myself having to dip into native dev. on the Mac for a while...
The 5.1.1 SDK doesn't seem to be set up for Xcode 3.2.3 as came with my new Mac. A quick dig round reveals
SDKROOT = /Developer/SDKs/MacOSX10.4u.sdk
in the xcconfig file - this doesn't exist. Bumping it to 10.5 seems fine. I checked the Xcode on an older machine - it's also (now) at 3.2.3 via updates but does have the 10.4 SDK, so I guess Apple have stopped bundling it with new machines.
PS: Just reading the stuff about Frameworks search paths... it was all so much easier with THINK C on a floppy disk.