I just encountered similar error after cleaning up our XCode projects and updated them to use XCode config files. It occured only to one of our iPhone application targets, not all of them.
XCode said
Error from Debugger: Failed to launch simulated application: Unknown error.
In Console, only information was following two lines:
30.9.2009 14.31.19 com.apple.launchd[99] (com.apple.iPhoneSimulator:com.apple.dataaccess.dataaccessd) Path monitoring failed on "/var/mobile/Library/Preferences": No such file or directory
30.9.2009 14.31.19 Xcode[13827] Error launching simulated application: Error Domain=DTiPhoneSimulatorErrorDomain Code=1 UserInfo=0x389db50 "Unknown error."
It turned out that I had accidentally deleted Info.list file build setting from the target and neither XCode nor iPhone simulator could emit any useful error message about that. Adding a build setting again fixed the problem.