If you're getting errors, you'd probably be better off without the colonel's gui for the moment. Just to make sure you're only getting errors from binarize. Use the command line..
I just did, and it worked. You're supposed to binarize uncompressed folders. The .p3ds turned ODOL, and they got a lot smaller. Nothing happened to the textures as far as i can tell.. Just put your addon folder in the same folder as bin.bat.
Just a wild guess: if i'm not mistaking, runtime error #5 means "File access denied". I would check for permissions, file/folder attributes (read-only), maybe diskspace..
Here's a bin.txt (just change the extension to .bat if you want to run it) commented by myself. You might want to remove "@echo off" .
Cheers