When you create the repack, it asks where you want to save the output. Default is c:\packages.
It then tries to open the files from there, when you build the package from ism. It's normal. It has to know where the necessary files are.
Best practices, in my humble opinion, is to put the output in a shared path in the network. If you do so, you normalize all the installation processes, you can have more than one technician working, and you avoid loosing your work if you forget to copy the files and format/clean the machine. You do you use virtual machines or clean ones in the repack process, right? 🙂